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“Simon Says”

  • Financial Analyst
  • Blog post submitted on 6th March 2014

On the local scene, Malta International Airport (MIA) is eye catching as it reported very positive results for the year and has significant plans to drive revenue growth in the future. The company’s main revenue stream, the airport operations, has reached a milestone of four million annual movements, a growth of 10.5% which translated into an additional €3 million of revenue. The Retail and Property Segment also increased by €3 million to €17.1 million an increase of 21% mainly due to the rental income from SkyParks Business Centre. The company doesn’t expect revenue from Airport operations to grow as significantly in the near term albeit two new carriers are planned in 2014, British Airways and the Austrian airline Niki. I believe the company is in a good position to achieve and possibly outperform the 2013 results, especially given the positive outlook for the Eurozone which is expected to grow 2.2% and the airport association ACI expecting a growth of 2.4% in passenger traffic for Europe. MIA is being cautiously optimistic and announced it is expecting traffic to grow at 2% for 2014. The company is cash rich and I expect it to employ this towards revenue generating business’ which should further bolster growth and diversification of the companies’ revenue streams.

Talking returns, the total comprehensive income amounted to €14.5 million in 2013, up from €12.5 million in 2012, an impressive 16%. This is equivalent to earnings per share of 10.78c up from 9.21c in 2012. This transpires to a P/E ratio of 20 as at today’s closing price of €2.17, which compares favourably to the average P/E of the industry which is currently 31. The company paid an attractive gross dividend yield of 5.3% as at today’s prices, which, in terms of the current interest rate environment and yields on corporate bonds is a very investor friendly element to consider.

Given that the airport operations, which are the companies’ main revenue stream (currently 70%) operate in a monopolistic environment with a positive growth outlook, this creates the basis for an attractive company to invest in. This argument is further bolstered by management’s ability to translate their operations into a healthy, profitable organisation with attractive prospects. I believe that MIA will prove to be a front runner on the Malta Stock Exchange, and although the stock is up circa 20% over the past year I believe that there is still room for growth and should be considered as a constituent of a well-diversified portfolio.

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