Mexico Airport Shares Seen Losing Altitude on Steadier Peso, Oil

  • Trio of operators faces challenge after surge in air traffic
  • Frigid U.S. winter, wooing bus travelers helped boost travel

A stock rally for Mexican airport operators may be coming to an end as crude prices and Mexico’s peso start to stabilize after months-long declines.

“The exchange rate and cheaper jet-fuel costs have helped these companies a lot, as all have had strong years,” said Jean-Baptiste Bruny, a BBVA Research analyst in Mexico City. “The threat is that if passenger traffic doesn’t continue to expand, it will be hard for these companies to continue to grow.”

Bruny echoes the skepticism among analysts tracking the trio of companies led by Grupo Aeroportuario del Pacifico SAB, known as GAP, which have benefited from rising traffic to some of the world’s most-popular tourist destinations. Declining oil prices and a weakening peso helped create airfare bargains -- luring U.S. sun-seekers south during a frigid winter and attracting domestic travelers who once took the bus.

Now those financial tailwinds for air travel look to be easing. The peso, forecast to finish this year 15 percent lower than 2014, is projected to strengthen by about 5 percent in 2016, according to analysts surveyed by Bloomberg. Windfall savings on jet fuel after oil’s 43 percent plunge in the past year may also be over. Crude will average $51 a barrel in 2016, the World Bank said in a report on Oct. 20, little changed from 2015.

GAP operates in Los Cabos and Puerto Vallarta and recently expanded to Jamaica. Grupo Aeroportuario del Sureste SAB, locally called ASUR, is adding capacity in Cancun. Grupo Aeroportuario del Centro Norte, dubbed OMA, serves Acapulco.

GAP rose 60 percent this year through Oct. 30, while ASUR gained 31 percent and OMA 25 percent, placing them in the top five among 15 regional peers, according to data compiled by Bloomberg. They have the highest annual net income and operating margins.

“One of the principal reasons for our growth has been the increase in passenger traffic,” GAP Chief Financial Officer Saul Villarreal said in a phone interview from the company’s headquarters in Guadalajara. “The low oil prices have provided the airline industry in Mexico economies in terms of fuel.”

OMA has also benefited from the fall in crude prices, which have lead to a spike in passenger traffic this year, Chief Financial Officer Viscaly Torres said in an e-mailed response to questions.

ASUR declined to comment on its share price.

Oil, Peso

The conditions that helped buoy passenger traffic -- up an average of about 17 percent in September -- are changing. 

If the peso and oil prices stabilize in the short-term, passenger traffic is likely to slow and cool the share performances of the three companies, said Bruny, who has an underperform rating on OMA, ASUR and GAP.

OMA is the only one of the three operators who has more analyst buy ratings than holds and sells combined. All of them are closing in on the 12-month price targets set by analysts, according to data compiled by Bloomberg, suggesting the rally may have run its course.

For some, there still may be room for gains while the fundamentals remain intact.

“Though the share prices for the airport operators are very high, we think they could still continue to grow in the mid to long-term,” said Isabel Rosado, an analyst at Interacciones Casa de Bolsa SA, who last month cut her rating on ASUR to hold from buy, and rates OMA and GAP buy. “We don’t think the Mexican airport industry has arrived at a point of saturation yet.”

The companies are all in excellent financial standing compared with regional peers, BBVA’s Bruny said. The Mexican airport operators also rank among the top four with the most cash on hand, according to the latest filings compiled by Bloomberg.

“Clearly these companies have had very strong growth in terms of passenger traffic and are in great position overall,” said Roberto Solano, equity analyst at Monex Casa de Bolsa SAB, who has a sell recommendation on all three companies. “But the market has gotten ahead of itself in terms of the share prices, which we see as higher than where they should be.”

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