Our thesis considers the following:

Transcription

1 Quarterly Report OMA Market Underperformer 2016 Price Target P$108.8 Price M Price Range / Shares Outstanding (Mill) Market Cap (Mill) 44,796 Float 46% Net Debt (Mill) 2,782 EV (Mill) 48,346 Dividend Yield 3.1% 2015 TTM 2016e 2017e Revenue 4,145 4,612 5,001 5,477 EBITDA 2,450 2,836 3,075 3,379 Net Profit 1,234 1,520 1,740 1,907 Free CF 1,561 1, EPS P/E 26.6x 29.5x 25.7x 23.5x EV/EBITDA 14.4x 17.1x 15.2x 13.5x P/BV 5.6x 8.4x 7.1x 4.0x Mauricio Martinez Vallejo mmartinez@gbm.com.mx +52(55) ext Pablo Zaldivar pzaldivar@gbm.com.mx +52(55) ext x 15.0x 14.0x 13.0x 12.0x 11.0x 07/15 OMA s new maximum tariffs translate into strong figures We are maintaining our price target of P$108.8 for the next 12 months, while introducing a Market Underperformer rating after the rally witnessed in the last month. We continue to believe that profitability improvements derived from more efficient terminals, along with an enhanced operating leverage are already priced in. Still, OMA should continue to benefit from healthy traffic readings, which together with higher maximum tariffs should bring further profitability growth. Our thesis considers the following: FCF should be under pressure in 2016 and Higher CAPEX commitments should reduce the company s ability to turn EBITDA into FCF. Waiting for more appealing valuations to participate on the name. Higher traffic should allow OMA to continue to improve its profitability, as operating leverage kicks in. Monterrey remains the third most important hub in Mexico. After the saturation of the Mexico City airport, domestic carriers are developing secondary bases in Monterrey, further boosting traffic growth. Business diversification to reduce results volatility. OMA s diversification activities should allow the company to reduce its exposure to aeronautical traffic. 2Q16 Highlights Traffic rose 8.7% YOY, driven by Culiacan (+16.7% YOY), Ciudad Juarez (+32.7% YOY) and Monterrey (+5.5% YOY). Aero revenue per PAX increased 16.8% YOY, as OMA continues to implement its new maximum tariffs. Non-aero revenues per PAX jumped 14.5% YOY, as the company faces easy comps from the opening of Monterrey s hotel. OMA s operating margin expanded 650bps to 51.1%, while its EBITDA margin did so by 480 bps to 62.5%. OMA generated P$431 million in FCF, despite a P$107 million CAPEX investment, due to strong operating performance. EV/EBITDA FWD 12M PRICE PERFORMANCE VS. IPC P/E 40% 36x 35% 35x 30% 34x 25% 20% 33x 15% 32x 10% -5% 0% 5% 31x 30x 29x -10% 28x -15% -20% 27x 26x 09/15 11/15 01/16 03/16 07/16 07/15 08/15 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 06/16 07/16 07/15 08/15 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 06/16 07/16 OMA IPC

2 Investment Thesis OMA is the cheapest airport operator among our Mexican sample; still, valuations are not attractive. OMA is currently trading at roughly 15x 12M FWD EV/EBITDA, versus its 3-year average of around 11x. Moreover, when adjusting its 2016e ROE of 25.8% for its P/BV, it remained practically unchanged from a year ago (3.8%), leading us to believe that all the benefits for the year are already priced in. FCF should be under pressure in 2016 and Although we believe that OMA s margins should expand, aided by operating leverage, higher CAPEX commitments should reduce the company s ability to turn EBITDA into FCF. As a result, 2016 and 2017 FCF yield should land at 1.3 and 1.9%, respectively, at current prices. Waiting for more appealing valuations to participate on the name. Higher traffic should allow OMA to keep improving its profitability, mainly through its Monterrey airport, as it represents one of Mexico s largest hubs. As such, we believe OMA s traffic should post a CAGR of 6.3%, on the back of Monterrey s CAGR of 6.4%. Monterrey remains the third most important hub in Mexico. After the saturation of the Mexico City airport, domestic carriers are developing secondary bases in Monterrey, including AEROMEX, Volaris, and Interjet, the market s largest players, while VivaAerobus a growing low cost carrier established its main base at that airport. Business diversification to reduce results volatility. We applaud OMA s efforts to reduce its dependence on aeronautical traffic through the investments made in two hotels and an industrial park. However, in terms of revenues, these businesses will only contribute with between 6 and 7% of revenues by We are maintaining our price target of P$108.8 for the next 12 months, while introducing a Market Underperformer rating after the rally witnessed in the last month. DCF 2016e 2017e 2018e 2019e 2020e NPV e EBITDA 3,075,383 3,378,632 3,701,365 4,134,609 4,508,159 85,814,157 Taxes 698, , ,324 1,054,844 1,180,702 24,044,769 Working Capital -112, ,082-49,136-80,661-43,523 OPERATING CASH FLOW 2,263,838 2,458,789 2,734,904 2,999,103 3,283,933 61,769,388 CAPEX -1,463,553-1,391,572-1,094, , ,489-7,016,100 FREE CASH FLOW 800,285 1,067,217 1,640,305 2,295,399 2,800,445 54,753,288 WACC 9.6% TOTAL PRESENT VALUE Net Debt 2Q16 46,296,502 2,782,134 Minority Equity 108,033 P/BV 2.0x Minority Equity*P/BV 216,066 Equity Value (P$) 43,298,302 Shares Outstanding (000's) 392,156 12M Fwd Price Target P$110.4

3 2Q16 Main Highlights OMA s PAX traffic keeps slowing down, as it faces an increasingly tougher comp base after linking 16 months of double-digit growth up to last December. As such, traffic rose 8.7% YOY, mainly driven by an 10.4% expansion on the domestic front. Delving in, Monterrey (+5.5% YOY), Culiacan (+16.7% YOY) and Ciudad Juarez (+32.7% YOY) remained as the main contributors. Revenue excluding construction rose 26.4% YOY driven by new maximum tariffs. We should recall that after OMA concluded its new MDP negotiation by the end of last year, it began to gradually implement its newly approved tariffs during the quarter, starting with the service portion in April and passenger charges in May. Aero revenue per PAX rose 16.8% YOY, reflecting the partial implementation of OMA s new maximum tariffs, which should reflect an increase of roughly 14% YOY when fully implemented. Non-aero revenue per PAX jumped 14.5% YOY, as the company enjoyed an easy comp base from the opening of Monterrey s hotel back in last year s third quarter, as well as the first revenues from its industrial park. Operating leverage allows for margin growth. During the quarter cost of services rose 17.6% YOY, or 8.1% per PAX as the company continues to benefit from the dilution of its fixed cost base among a larger passenger base, falling behind revenue per PAX growth. As such, OMA s operating and EBITDA margins rose 650 and 480bps, reaching 51.1 and 62.5%, respectively. OMA generated P$431 million in FCF, due to the company s solid operating performance, although partially offset by P$107 million in CAPEX. We should note that the company has a P$1.4 billion CAPEX commitment for 2016, which should translate into stronger CAPEX for the remainder of the year after having spent just P$148 million by 1H16. Thus, the company s net debt reached P$2.8 billion, equal to a 53.2 % QOQ decrease, due to the payment of a P$1.4 billion dividend, reaching 1.0x net debt/ebitda ratio. Guidance Update. OMA adjusted its guidance upwards, calling for traffic of between 8 and 10% for FY 2016, as well as an EBITDA margin of between 61 and 63%. Previous Guidance Updated Guidance Traffic 6-8% 8-10% Aero Revenues 22-24% 24-26% Non- Aero Revenues 13-15% 17-19% EBITDA Mg % 61-63% Estimates vs. Official Results Adjusting for INIF 17 GBM's Estimates Official Results Sales 21.1% 26.4% Operating Profit 45.9% 46.2% EBITDA 27.3% 36.8% Net Profit 52.9% 60.6% Op. Margin 53.6% 51.1% EBITDA Mg. 61.1% 62.5% Net Margin 34.4% 34.4% Traffic Breakdown YOY Change Domestic Intl. Total Acapulco -6.5% -16.0% -7.1% Ciudad Juarez 30.6% % 32.7% Culiacan 16.5% 33.8% 16.7% Chihuahua 13.0% 0.2% 11.7% Durango 49.7% 93.9% 52.7% Mazatlan 20.4% -3.7% 13.2% Monterrey 7.6% -6.1% 5.5% Reynosa 11.3% 68.9% 11.3% San Luis Potosi 13.7% 12.3% 13.3% Tampico -5.1% -7.6% -5.2% Torreon 20.2% 15.7% 19.7% Zacatecas 4.0% -0.9% 2.2% Zihuatanejo -5.2% -12.8% -7.5% Total 10.4% -2.3% 8.7% Revenue Breakdown MXN Thousands (except per PAX) 2Q15 2Q16 Aero Revenues 751, ,638 Aero per PAX Non- Aero Revenues 270, ,239 Non Aero per PAX Commercial Revenues 142, ,010 Commercial per PAX Construction Revenues 83,919 46,886 Total Revenues 1,106,226 1,338,763 Total Revenues* 1,022,307 1,291,877 Total Revenues per PAX* *Excluding Construction

4 OMA s Fact Sheet Financials (P$ Mill) 2015 TTM 2016e 2017e 2018e Operating Data 2015 TTM 2016e 2017e 2018e P&L Revenue Breakdown Revenue ex-construction 4,145 4,612 5,001 5,477 5,962 Traffic ('000) 16,920 17,655 18,286 19,502 20,696 Var (%) 21.4% 23.4% 20.7% 9.5% 8.9% Aeronautical Revenues 3,033 3,370 3,707 4,044 4,381 Total Revenue 4,493 4,839 6,265 6,718 6,907 Non Aeronautical Revenue 1,119 1,242 1,357 1,521 1,677 Var (%) 20.7% 17.6% 39.4% 7.2% 2.8% Operating Profit 2,037 2,403 2,711 2,985 3,285 Valuation 2015 TTM 2016e 2017e 2018e Var (%) 38.6% 42.8% 33.1% 10.1% 10.0% EPS Operating Mg. 49.1% 52.1% 54.2% 54.5% 55.1% P/E 28.5x 29.5x 25.7x 23.5x 21.0x Adj. EBITDA 2,450 2,836 3,075 3,379 3,701 EV/EBITDA 15.3x 17.1x 15.2x 13.6x 12.0x Var (%) 30.8% 32.7% 25.5% 9.9% 9.6% P/B 6.0x 8.4x 7.1x 4.0x 3.8x EBITDA Mg. 59.1% 61.5% 61.5% 61.7% 62.1% P/Sales 8.5x 9.7x 9.0x 8.2x 7.5x Interest Taxes Return 2015 TTM 2016e 2017e 2018e Net Profit 1,234 1,520 1,740 1,907 2,134 ROA 9.9% 12.7% 12.7% 12.1% 11.9% Var (%) 20.4% 39.9% 41.1% 9.6% 11.9% ROE 20.7% 28.7% 25.8% 22.3% 20.2% Net Mg. 29.8% 33.0% 34.8% 34.8% 35.8% ROIC 17.2% 19.7% 21.1% 20.4% 20.4% Balance Sheet FCF Yield 4.4% 3.7% 1.2% 1.8% 3.2% Cash 2,733 2,040 3,304 4,119 5,532 Dividend Yield 3.3% 3.1% 3.1% 0.0% 0.0% Accounts Receivable ,035 1,126 Buyback Yield 0.7% 0.0% 2.7% 0.0% 0.0% Inventory Fixed Assets 6,349 6,320 7,554 8,658 9,445 Leverage 2015 TTM 2016e 2017e 2018e Total Assets 12,510 12,048 14,793 16,802 19,094 Debt/Equity 0.8x 0.9x 0.6x 0.5x 0.4x Accounts Payable Net Debt/EBITDA 0.8x 0.9x 0.5x 0.2x -0.2x Debt 4,714 4,699 4,701 4,701 4,701 Interest Coverage -8.3x -9.7x -10.3x -11.8x -14.5x Total Liabilities 6,560 6,616 7,089 7,185 7,337 Equity 5,869 5,324 7,610 9,517 11,653 Turnover (Days of) 2015 TTM 2016e 2017e 2018e FCF Accounts Receivable Operating Profit 2,037 2,403 2,711 2,985 3,285 Inventory Depreciation Payables Interests Cash Conversion Cash tax Working Capital Liquidity 2015 TTM 2016e 2017e 2018e CAPEX ,464-1,392-1,095 Current Ratio 3.3x 3.1x 3.2x 4.0x 5.0x Free Cash Flow 1,561 1, ,413 Quick Ratio 3.3x 3.1x 3.2x 4.0x 5.0x

5 Investment Risks In addition to the risks related to macroeconomic aspects, we believe the most relevant risks in the Mexican Market are: 1) changes in government policy which might or might not affect the aeronautical industry; 2) unexpected changes in regulation by regulatory authorities such as: SCT, DGAC, etc. Some of the risks regarding OMA are: 1) limited operating flexibility given its condition as borrower of a public service regulated by the federal government, 2) possibility of losing the concession to the federal government under certain circumstances not controlled by the company; 3) relative dependence on the results of Monterrey s International Airport; 4) negative performance produced by terrorism and international conflicts as well as their consequences; 5) adverse impact of natural disasters on the company s activities; 6) strong dependence on airlines ability to operate; Stock Price Performance vs Analyst Estimates /07/ M arket Performer 25/07/ M arket Underformer Jul-15 Aug-15 Sep-15 Sep-15 Oct-15 Nov-15 Nov-15 Dec-15 Jan-16 Jan-16 Feb-16 Mar-16 Apr-16 Apr-16 May-16 Jun-16 Jun-16 Jul-16 Aug-16 Price Price Target

6 Important Disclosures: The analyst or analysts involved in the creation of this document hereby certify that the views expressed in this document accurately reflect their personal opinions and that they have not and will not receive direct or indirect compensation for expressing specific recommendations or views in this report. This report has been prepared by GBM and is subject to change without notice. GBM and employees shall have no obligation to update or amend any information contained herein. This report is for informational purposes only, based upon publicly available information, which we believed is reliable, but its accuracy and completeness cannot be guaranteed. GBM makes no express or implied representations or warranties that such information is accurate or complete and, therefore, GBM and employees shall not in any way be liable for related claims. This report does not constitute an offer to buy or sell any security or participate in any trading The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances. Each investor shall make their own determination of the suitability of an investment of any securities referred to herein and should consult their own tax, legal, investment, or other advisors, to determine such suitability. This report may discuss numerous securities, some of which may not be qualified for sale in certain countries or states therein and may therefore not be offered to investors in such countries or states. This report or any portion hereof may not be reproduced, reprinted, sold or distributed without the written consent of GBM. The current document is not issued with the purpose of ensuring a future business relationship with the Issuer; thereby, said document constitutes no promise or guarantee.