EUR 50.90 For Business Accounts Only

Belgrade Airport (AERO)

Belgrade Airport (AERO)

Belgrade Airport (AERO) recorded a strong upward trend in 2017 due to the increase in the number of passengers and cargo. At the same time, the implementation of the concession procedure brought record market price levels after the transaction price was announced at the beginning of this year, which significantly exceeded the expectations of the market.

The increase in the number of passengers by 8.5% and the cargo turnover by 42% increased the company's revenue growth by 10.1% in 2017, while this growth would be even higher without the increase in the dinar against the euro by around 4%. Operating profit of the company jumped 12.2% to over RSD 4bn, while higher financial expenses (FX loss) and tax expense contributed to a modest increase in net profit by 2.4% to RSD 3.3bn. At the end of December last year, Airport remained a low-indebted company, given that the cash position was 2.6 times higher than the company's financial obligations (negative net debt).

 ¤ Concession - At the beginning of the year, the Government of Serbia declared French Vinci Airports a winner on a tender for a 25-year concession. The bidder has pledged to pay a one-off fee of EUR 501m (EUR 14.6 per share), annual concession fee ranging from EUR 4.5 to 16m, and to provide investments of EUR 732m during the concession period.

 ¤ Recapitalization - Extraordinary assembly of the company, scheduled for March 20^th, at which additional 0.4% of shares will be issued on behalf of the Government of Serbia and entered as non-monetary assets in the company's capital, is the last step towards signing a concession contract expected during March.

 ¤ Transport - After last year's passenger growth of 8.5%, the company registered a 3.1% growth in the first two months of 2018, while the concessionaire expects to reach 7.9m passengers by 2024, or CAGR of almost 6%.

¤ Valuation – Airport shares are currently traded at around 4-5% discount in relation to the price paid by the concessionaire (around RSD 1,718 gross per share). The reasons for this valuation should be sought in many ambiguities about the concession contract, and the dynamics and method of payment of this amount to minority shareholders. It is to be expected that after this payment, trading of the Airport shares will continue at much lower prices, which in the medium term will determine the amount of annual concession fee that the company will pay to shareholders through dividends. At least in the next 10-15 years, the Airport will be strictly dividend stock, most probably with a significantly lower level of liquidity.