Invest
What Sydney Airport investors can learn from Gatwick
Badgerys Creek Airport will begin construction next year and the new airport could be a good thing for income investors, an equities strategist has said.
What Sydney Airport investors can learn from Gatwick
Badgerys Creek Airport will begin construction next year and the new airport could be a good thing for income investors, an equities strategist has said.
The controversial project – most recently reported as forcing families to re-bury loved ones to make way for the airport – is due to begin construction in February 2018.
While it could be assumed that as Sydney Airport’s monopoly is threatened, income investors should also be worried, Julia Lee from Bell Direct has argued that that isn’t necessarily the case.
Noting that Sydney Airport stocks are attractive to income investors due to their higher distribution and attractive earnings, Ms Lee said such investors should consider what happened in London when Gatwick Airport began expanding.
“If you have a look at the example in London with Heathrow Airport versus Gatwick Airport, when we saw Gatwick opening up, it actually turned out to be a positive for the owners of Heathrow,” the equities strategist told Nest Egg.
“That's because the higher margin airlines tended to stay with the main one [Heathrow airport], whereas the cheaper airlines and the lower margin ones tended to go to more of the regional level airports, so it's not necessarily a negative.”
Recognising that competition is usually thought of as a negative, Ms Lee said that in markets large enough to accommodate more competitors, such competition can be a positive thing in the longer term.
“If Sydney airport is attracting more of those premium, higher-margin type flights, then Badgerys Creek might take some of those cheaper, lower margin, lower profitability type businesses.”
However, Ms Lee advised caution: “Maybe we will see margins increasing at Sydney Airport over time but certainly there's a bit of uncertainty related to that and that's probably what investors do need to be aware of and just keep their eye on.”
The project’s history
In May this year, Sydney Airport declined the offer to own and run the Western Sydney Airport (WSA) at Badgerys Creek.
Kerrie Mather, Sydney Airport’s boss explained at the time: “Sydney Airport’s decision not to accept the WSA NOI on the terms provided is in the best interests of our investors who represent millions of Australians through their superannuation funds.
“Despite the opportunities that WSA will present, the risks associated with the development and operation of WSA are considerable and endure for many decades without commensurate returns for our investors.”
The decision seems to be working out well for investors. Earlier this month, Ms Lee pinpointed Sydney Airport stocks as one to watch, noting its “attractive income” and its earnings increase of 8 per cent, which the company revealed during reporting season.
“They also flagged higher distribution for the coming year which is the type of thing you want to see from an income stock,” she continued.
It doesn’t hurt that the company knows how to turn a profit. The company made $167 million in FY17.
According to the Australian Competition and Consumer Commission (ACCC), Sydney Airport made $100 million on parking alone in the 2015/16 financial year. That’s because for every $1 received in parking, a staggering 73.1 per cent was profit.
At the time of the report, ACCC chairman Rod Sims called for more competition in the sector.
He said: “They [Sydney Airport] are in the delightful position from their point of view where they've got the car park monopoly and they get the ability to levy charges on the competitors, so they can levy fees on taxis for entering the airport, they can levy fees on the shuttle buses for the off-airport parking.
"They are in a very strong position."
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
