Mexico Airport Operator GAP Falls as Citigroup Says Sell Shares

Grupo Aeroportuario del Pacifico SAB, the Mexican airport operator with hubs in Guadalajara and Tijuana, declined the most in a month as Citigroup Inc. cut its recommendation on the stock to sell.

Shares of GAP fell 3 percent to 87.06 pesos, the biggest drop on a closing basis since May 20. It was the worst performer on Mexico’s benchmark IPC index after builder Empresas ICA SAB.

While Guadalajara-based GAP has surpassed growth at Mexico’s two other publicly-traded airport operators, it is embroiled in a long-running legal battle with Grupo Mexico SAB, the mining and railroad company controlled by billionaire German Larrea. GAP may also face mounting costs as the company seeks government approval of its development plan, just as a price war between the two biggest carriers, which had boosted traffic, eases.

“With traffic growth starting to decelerate, GAP shareholders also face regulatory-overhang risks,” Citigroup analysts Stephen Trent and Juliano Navarro wrote in a research report to clients published today.

GAP shares have climbed 25 percent in 2014, while the IPC benchmark is little changed. The airport operator has returned 33 percent this year including dividends.

“At current prices there is little upside potential because these prices already reflect strong passenger increases, better margins, new projects and strong cash generation,” Bernardo Velez, an analyst at brokerage GBM Grupo Bursatil Mexicano, said in a phone interview from Mexico City.

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