It feels like Sydney Airport Holdings Pty Ltd (ASX: SYD) can do no wrong with the expensive-defensive stock remaining a hot favourite among investors looking for stable earnings and dividend growth.
Even as the earnings outlook is clouding over for many other stocks, Sydney Airport can count on the reliable growth of international travellers (particularly the Chinese) flocking to our shores through Australia's biggest city.
But a new report is testing this assumption and may chip away at the premium that the market has so far been willing to cough up to own part of this strategic asset.
Sydney Airport is losing its status as an international tourism gateway for visitors travelling to and from Australia, according to a report by Deloitte Access Economics and reported in today's Australian Financial Review.
It seems that only 40% of overseas tourists are flying through Sydney compared with 46% a decade ago. These tourists are opting instead to travel through airports in Melbourne, Adelaide and the Gold Coast.
This is significant for Sydney Airport, which has been in pole position to benefit from the tourism boom that has seen a 34% surge in international traveller numbers to 39 million over the past five years to FY17.
In contrast, domestic traveller numbers have only increased 9% over the same period to 118 million.
If this trend continues, the airport operator's profit growth will suffer and so will its ability to pay its generous dividend.
This means investors may not continue to rank Sydney Airport in the same category of other infrastructure owners with strategically important assets, such as toll road company Transurban Group (ASX: TCL) and logistics facilities owner Qube Holdings (ASX: QUB).
Sydney Airport trades on a FY19 consensus price-earnings (P/E) multiple of around 34 times when the average P/E of the top 200 stocks is standing at around 16 times.
Those looking for exposure to tourism and travel may be better off looking at more attractively priced stocks like Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT).
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