Photographer:Santi Burgos/Bloomberg

Bears in Europe's Hottest IPO Proven Right After Spain Election

  • Eight sell ratings had already reflected regulatory worries
  • State-owned stake adds risk to political turmoil, analyst says

Analyst warnings had failed to deter investors in Aena SA, making the world’s biggest airport operator one of Spain’s top performing stocks. They’re now seeing things in a more bearish light, after Sunday’s inconclusive election sent the stock tumbling.

Concerns that a less market-friendly government lurks has triggered a 7 percent selloff after the vote result on Dec. 20 -- a sign investors are starting to agree with the eight analysts who recommend selling the shares, double those who say buy. Analysts are already worried that regulators hold too tight a grip on Aena’s operations, and Macquarie Group Ltd.’s Douglas McNeill sees any policy changes hitting the company especially hard because the state owns a 51 percent stake.

“There’s no certainty about what the new political and regulatory framework may bring,” said McNeill, a transport analyst at Macquarie in London. “There’s a feeling that anything that made the company attractive has already been priced in.”

Analysts have been bearish on Aena since the company IPO’d in February

A record 65 million foreign tourists visited Spain in 2014, rising an annual 7.1 percent, the biggest increase in 14 years. The promise of a continued passenger boom helped Aena’s initial share sale become Europe’s biggest since 2011.

Bearish analysts who made Aena one of the least liked companies in the IBEX 35 Index had been wrong all along -- predicting declines even as the stock soared past national favorites including Inditex SA. Their pessimism put the average 12-month target price at or below the shares for most of the year. At one point they were more than 13 percent off. This week’s decline better aligned the bears with reality: Shares are now trading at 104.20 euros at the close of trading in Madrid, compared with an average forecast of 102 euros.

An Aena representative declined to comment on the possible impact of a change in government.

In a move that one shareholder said would damage investor confidence in the nation’s regulated companies, Spain’s markets and competition regulator in July cut the fees Aena charges to airlines, reducing them by 1.9 percent despite company protests. That didn’t prevent an 84 percent jump in net income in the first nine months of the year.

While the stock’s plunge the day after the election was the biggest since its listing in February, Aena is still the second-biggest gainer in the IBEX 35 this year after Gamesa Corp. Tecnologica SA. A change in government shouldn’t affect the company’s results, said MainFirst Bank AG analyst Borja Castro Perez Manzuco.

“It sold off because now Spain is seen as a riskier investment and some investors reduced exposure, but Aena is still a solid bet,” Castro said. “The company is getting good results, with strong cash flow and it’s reducing debt.”

Spain was left with no clear governing majority after acting Prime Minister Mariano Rajoy’s People’s Party lost more than a third of its support in Sunday’s election, as voters deserted the two main parties for new political groups. The outcome is handing a surprise end-of-year victory to Aena’s pessimists.

“The concern about the impact of political uncertainty on the economy, and the more specific concern on the government influence” will weigh on the stock going forward, McNeill said.

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