Sydney Airport Stock Falls 4% – Here’s Why

The Australian Stock Exchange (ASX) had an underwhelming day yesterday, Monday 30 December 2019. The ASX 200 Index fell 0.3%, ostensibly tracking a luck lustre finish to the year on Wall Street. But the worst-performing stock on the ASX 200 yesterday was Sydney Airport Holdings Ltd, owners of the eponymous Sydney AIrport.

A Boeing 787 landing into Sydney Airport. Photo: Jetstar via Flickr.

According to a report in Reuters, Sydney Airport Holdings fell 4.3% yesterday. Don’t feel too poorly for shareholders though. The drop was largely due to the stock going ex-dividend. Earlier in December, Sydney Airport Holdings paid its shareholders unfranked dividends of 19.5¢ per share.

Big institutional funds behind Sydney Airport

Sydney Airport Holdings is trading at around AUD$8.80 this morning, off its 52 week high of AUD$9.30 but still a healthy gain on 52 week low of AUD$6.37.

The biggest shareholder in Sydney Airport Holdings is UniSuper Ltd (which has a 17.4% stake). Other key shareholders include Capital Research and Management Co, Fidelity Management and Research Co, BlackRock Fund Advisors, CI Investments Inc, and the Ontario Teachers Pension Plan Board.

There was strong growth in international traffic at Sydney Airport in 2019. Photo: Maksym Kozlenko via Wikimedia Commons.

But given the shares are publicly traded on the ASX, virtually anybody can buy themselves a stake in Australia’s busiest and richest airport.

While passenger numbers were down 0.2% in the first six months of 2019, net profit was up. Sydney Airport made a net profit of approximately USD$140 million in the first six months of 2019. Revenue for these six months was approximately USD$558 million. In contrast, in the first six months of 2018, the airport made a net profit of approximately USD$122 million.

Sydney Airport finishes 2019 with a big win

Sydney Airport is finishing up 2019 having won a battle against a coalition of airlines and airport operators who were calling for  greater economic regulation of Australia’s big airports – and Sydney is the big daddy of Australian airports.

At the core of the user’s complaints were high fees, lack of flexibility and general abuse of their monopoly position by the airport owners. The complaint was referred to Australia’s Productivity Commission for a formal review. In October 2019, the findings came down on the side of the airport owners.

AA’s departing Sydney on its daily flight to LAX. This flight had load factors of approximately 94%. Photo: Nick_D via Wikimedia Commons.

Naturally, the airport owners were delighted at the result. Australian Airports Association CEO, Caroline Wilkie said the findings demonstrated commonsense and she suggested the airlines and other airport users had failed to make a decent case for more regulation. Ms Wilkie said;

“We are pleased the facts presented over the course of this process have proven the significant benefits airports are delivering to our economy and community.

“Adoption of the Commission’s recommendations will provide the stability needed for Australian airports to continue to grow and invest.”

Continued growth expected at Sydney

The airlines, car rental companies, and retailers at airports were less thrilled at the result. But last time I looked, they were all still using Sydney Airport. As did some 44.4 million passengers who passed through Sydney Airport last year. 

Given these kind of numbers and the fact that airlines, car rental companies and other airport users have little alternative but to service Sydney Airport, financial analysts see yesterday’s share slump as little more than a blip on the continuing rise of Sydney Airport’s share price and are expecting a fast rebound in the New Year.