AENA SM

Publicly traded companies mentioned herein: Aena SME SA (AENA SM)

Highlights

The presenter is long shares of Aena at €160, and sees a favorable risk/reward setup for the world’s largest airport operator after a pullback from recent highs near €180. The Spanish government still owns 51% of the company, which has a monopoly in Spain and has a direct interest in 15 airports outside of the country (i.e., Mexico, Colombia, and the UK). Since its February 2015 IPO, Aena has experienced rapid growth and been able to reduce its leverage. Carrier capacity growth provides a near-term tailwind, and looking at the airlines’ reported numbers provides a high degree of visibility into what Aena’s next six months may look like. At the same time, the business appears to be underearning and there are a number of levers management can pull to improve the commercial economics of the business (FCF could grow at a mid-teens rate over the next 5+ years). If his estimates are accurate and Aena can grow its FCF/ share starting from a €10-11/ share base this year, the stock is likely to trade up to €220 over the next 12-24 months.