Grupo Aeroportuario Del Sureste: A Better Mix Of Risk, Growth, And Value Today

Core Viewpoint - Grupo Aeroportuario del Sureste (ASR) has demonstrated resilience compared to its peers due to its strong tourist-driven business, diverse operations, and robust non-aero revenue base, despite challenges in the broader Mexican airport sector [1][6] Financial Performance - Revenue increased by 20%, with a notable 18% growth in revenue excluding construction, aligning with expectations [2] - Aerospace revenue rose 24% year-over-year, slightly below expectations, while non-aero revenue grew 7%, exceeding expectations by approximately 3% [2] - Consolidated EBITDA increased by 18% year-over-year, with margins improving by 80 basis points to 69.2%, although it declined sequentially by 4% [2] Traffic and Capacity Challenges - Sureste's traffic faced a decline, with domestic traffic down 7% and international traffic down 2.5%, while overall traffic to Cancun decreased by about 8% [2][4] - The company has less exposure to issues with Pratt & Whitney aircraft engines, with only about 8% to 10% of its traffic at risk [4] Government Policy and Economic Factors - Sureste's recent Master Development Program with the government reduces its exposure to potential changes in government policy [4] - Economic risks persist due to the appreciation of the peso making Mexico a more expensive destination, potentially impacting traffic volumes [4] Long-term Outlook - The company is expected to achieve around 12% revenue growth over the next five years, driven by new tariffs and traffic growth to major destinations [5] - Long-term annualized growth is projected to stabilize around 9%, with EBITDA margins expected to dip to approximately 57% [5] - Valuation approaches indicate that Sureste shares are undervalued, with a potential upside of about 30% based on discounted cash flow and multiples-based valuation [5][6]