Mexico Airport Operator GAP Comes to Jamaica and Feels All Right

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For a Mexican airport operator with runways in some of the country’s most sought-after beach resorts, it’s the company’s first international foray that’s sparking a rally in the shares.

Grupo Aeroportuario del Pacifico SAB, which operates the airports in Los Cabos, Puerto Vallarta and 10 other Mexican cities, agreed in April to buy Sangster International Airport in Montego Bay, Jamaica, for $190 million. That’s helped drive the stock to a 44 percent gain this year -- the most on Mexico’s benchmark index.

The boost from the Jamaica acquisition for GAP, as the company is known, extended a rally in the shares posted earlier in the year when a harsh U.S. winter sent tourists flying to Mexican beach destinations. Barclays Plc said last week that the stock could climb almost 10 percent over the next 12 months, driven by traffic growth and better profitability.

The Jamaican airport “has definitely added value for shareholders,” said Marco Montanez, an analyst at the Mexican brokerage Vector Casa de Bolsa, who raised his recommendation on the stock last week to buy. “With GAP and the incorporation of operations in Montego Bay in our yearly projections for the next two to three years, we see the company still generating value for the shares.”

GAP said on July 23 that second-quarter sales surged 52 percent including the Jamaican operations. That was 14 percent above the average estimate of analysts surveyed by Bloomberg.

18% Gain

The results helped drive the shares to an 18 percent gain in July alone, their biggest monthly rally in almost five years.

Chief Financial Officer Saul Villarreal said the price paid for the Jamaican airport equated to 6 or 7 times earnings before interest, taxes, depreciation and amortization. On average, airport acquisitions are made at 11 to 12 times, he said.

“It was an extraordinary acquisition for us,” Villarreal said in an interview in New York.

For Chief Executive Officer Fernando Bosque, the Jamaica acquisition represented a homecoming of sorts; prior to coming to GAP, he served as CEO of the holding company for the Montego Bay airport. In an interview, he said his knowledge of the company and relationships with authorities in the country allowed him to understand the value better than other bidders.

“At first there may have been a perception that Jamaica is a small country,” Bosque said by telephone. “But it attracts a lot of tourists to the Caribbean. And at first, the market may not have fully understood the value it was going to add.”

Biggest Shareholder

According to Barclays, the stock could rise to 145 pesos in its “upside case.” GAP was little changed at 133.82 pesos as of 12:55 p.m. in Mexico City.

One risk to the stock is that Grupo Mexico SAB, GAP’s biggest shareholder, is poised to sell shares following a ruling by the Mexican Supreme Court that requires a reduction of its stake, Barclays said.

GAP has rules limiting non-controlling shareholders to 10 percent or less. Grupo Mexico owned about 20 percent of the company as of April.

The company’s Mexican airports, which also include the urban centers of Guadalajara and Tijuana and the colonial cities of Guanajuato and Morelia, will continue to get a lift from tourists who are lured by a weakening peso, according to Jose Espitia, an analyst at Grupo Financiero Banorte SAB, the country’s largest publicly-traded bank.

On Wednesday, the currency fell for a third straight day to its lowest close on record.

“The currency is still at depressed levels,” Espitia said by phone from Mexico City. “This all presents a positive panorama for the sector, GAP included.”

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