24 May 2019

Meager yield on Beijing airport deal drags on NWS

The reaction from investors in NWS Holdings (00659.HK) was swift last week after the conglomerate said it spent HK$2.35 billion (US$303 million) on an 8.84 percent stake in Beijing Capital International Airport (BCIA) (00694.HK). After the announcement, investors dumped NWS shares, sending it down 7.8 percent within two trading sessions. 

Hong Kong Economic Journal columnist Dai Zhao suggested that although the Beijing facility offered a stable income for its shareholders, the market was unimpressed with the unattractive yield of what is its first venture into airports.

NWS’s strategy is to look for investment opportunities that can diversify and strengthen its portfolio, which is based on roads, energy, water and ports and logistics.

NWS, the infrastructure arm of New World Development Co. (00017.HK), is usually the sole operator or co-operator of those core businesses but this time it won’t be involved in day-to-day operations because it will have only a minority stake.

BCIA operates three terminals and three runways and handles more than 80 million passengers every year. The airport is the world’s second-busiest by passenger traffic.

Dai said that if BCIA gains 20 percent and dividend yield growth is 16 percent, the price-to-earnings ratio of the NWS investment will be 15 times with a yield of just 2.6 percent. But, there could be more upside from value appreciation if the asset is held for the long term, which seems to be NWS’s intention, Dai said.

– Contact the writer at [email protected]



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