Why Auckland International Airport Ltd may hand investors a short-term boost

Find out why Auckland International Airport Ltd (ASX:AIA) wants to sell its 24.55% stake in North Queensland Airport (NQA).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Auckland International Airport Ltd (ASX: AIA) conducted a strategic review of its 24.55% stake in North Queensland Airport (NQA) with the goal of determining whether it should continue to hold or sell this asset.

NQA comprises the Cairns and Mackay airports of which AIA is a co-investor alongside Perron Investments, The Infrastructure Fund, and the JPMorgan Asset Management-advised IIF Cairns Mackay Investment Ltd.

The results of this strategic review confirmed that North Queensland Airport remains a 'highly attractive asset' but whilst AIA stated that it would be comfortable holding the asset, its preference remains to sell.

The reason why it is looking to sell the asset despite being enthusiastic about its future prospects is because the asset is not core to AIA's business strategy.

Yesterday the company announced that it had 'encountered strong buyer interest' and expected to provide a more detailed market update on or before the FY results announcement in February 2018.

Impact

The AIA share price was pretty flat on the announcement which suggests that investors are looking to wait until further details emerge to determine what the likely impact of any sale would be. Should the price of any potential sale be high enough, the market would be sure to react positively.

Foolish takeaway

Infrastructure stocks such as AIA and Sydney Airport Holdings Pty Ltd (ASX: SYD) tend to benefit from high barriers to entry and in some cases, operate as monopolies in the regions they serve.

This makes them attractive long-term businesses to own but not always good investments particularly when their quality is fully reflected in their share prices. This has been the case in this low interest environment as investors search for yield.

Sydney Airport is a good example of this with its monster PE ratio of 45. AIA is priced better with a PE ratio of 26 and looks to be the better option between the two. Overall, I'd hold AIA shares if I already owned them.

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned. You can follow Kevin on Twitter @KevinGandiya. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »