Over the past few months, I have accumulated a 70bp position
in Beijing Capital International Airport (694 HK) at an average price of
HK$7.50, and continue to nibble at the position on weakness. Given the right
opportunities to add, I can see this growing into a core portfolio holding in
time. I believe the stock to be attractive, trading at a FCF yield of 8-9% and
a forward FY17E PE multiple (on conservative assumptions) of 15x. Here is why.
BCIA operates the world’s second busiest airport, with
annual passenger throughput of some 90m people. Airports are generally great tollgate-type
businesses that have delivered outstanding risk-adjusted returns for long-term
shareholders. One need look no further than the long term share price charts of
the likes of Sydney Airport, Auckland International Airport, or Airports of
Thailand or Malaysia for evidence of that. Multiples of 30-40x are not
uncommon, as investors have come to appreciate the high value of these assets.
