The share price of Sydney Airport Holdings Pty Ltd (ASX: SYD) is bucking today's market downtrend after the airport operator posted its March traffic numbers that shows it is still benefiting big from the tourism boom.
The stock inched up 0.2% to $6.54 against the headwind of a falling market with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) losing 0.2% in morning trade.
The latest update has given investors reasons to think that the good times for Sydney Airport can roll on too!
But you have to cough up if you want to board this stock as Sydney Airport is trading on a FY19 consensus price-earnings (P/E) multiple of 32.5 times. That's double what the top 200 stock index is trading on!
What's more, rising bond yields are posing another challenge for the stock, which is largely regarded as a "bond-proxy" that moves down when yields rise (price and yield move in opposite directions).
However, the influx of inbound tourists, particularly from China, has more than offset the headwinds and a P/E of over 30 is reasonable for a fast-growing stock that can provide a level of certainty about its outlook.
Sydney Airport ticks that box with management reporting an 11.1% uplift in international visitors going through its terminal in March this year compared to the same month last year. This was also helped by the fact that the Easter holidays came earlier this year.
While more domestic travellers use Australia's largest airport, growth in that category paled in comparison with an increase of 3.5%.
We know where the growth engine is for Sydney Airport and its Chinese and Indian visitors that are fuelling the increase in the international numbers.
Indian travellers increased by 28.2%, Chinese visitors rose 19.9%, and South Koreans were up 15.2% for the month.
The growth is also due to an increase in the number of flights coming into the airport and this is expected to keep growing.
Air India said it was adding an extra flight to its four-per-week schedule between Delhi and Sydney starting March 30. This means there are 14,000 extra seats available to travellers a year.
Meanwhile, Virgin Australia Holdings Ltd (ASX: VAH) announced a new daily A330-200 service to Hong Kong that would increase the number of available seats by 200,000 a year.
Don't be surprised to see Qantas Airways Limited (ASX:QAN) leveraging off this tourism boom too.
Sydney Airport isn't the only bond-proxy that is outperforming the market. Transurban Group (ASX: TCL) is another that is also defying the threat of rising bond yields.
Sentiment towards these stocks probably won't turn until late 2018 or early 2019 when yields are expected to put on more meaningful increases.
Enjoy the ride for now!
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