Grupo Aeroportuario del Sureste (ADR) (ASR)

Grupo Aeroportuario del Sureste (ASUR) has got license to operate and develop nine airports in the southeast region of Mexico till 2048. The company drives its revenues from two segments: aeronautical revenues and non-aeronautical revenues. As operators of the airports it charge airlines, passengers and other users fees for using the airport facilities, which forms part of the aeronautical revenues and contribute about 70% to the overall tally. ASUR also derives rental and other income from commercial activities conducted at its airports, and is included in the non-aeronautical revenue segment. Cancun Airport is the biggest revenue generator for the company providing 75% of the over all inflows.

Mexico is one of the leading tourist destinations, ranking among top ten countries with over 20 million foreign visitors in 2005. Cancun’s airport handles most international tourist in Latin America, while the other southern airports that near various beaches and oil refining destinations, also are quite popular amongst the domestic tourist. In 2005, Hurricane Wilma caused Cancun’s tourism industry to take a halt. Though, industry is now reeled back, notching up double-digit tourist growth, such an environmental threat will always be inherent part of the business.

ASUR with a geographic monopoly has been registering healthy returns and growing margins. The 20% rise in passenger traffic is also having a positive impact, as it is the main driver for aeronautical revenues.

In 2007, ASUR will benefit from constant adding of new routes and the completed rebuilding of Cancun’s airport, which is expected to continue the rebound from the huge slump during the hurricane. Adding to it, Cozumel’s airport that is still reeling behind the post hurricane level can bounce back and provide strong growth. Further, margins are also expected to improve further, due to larger share from the Non-aeronautical segment, making ASUR a healthy investment.

ASR as an airport in Mexico has advantages because of its financial arrangement with the Mexican gov't. Their primary traffic was related to tourists that flew to Cancun and their traffic was dampened due to much hurricane damage in Cancun. With some luck on hurricanes and resumption of air traffic back to Cancun the airport traffic should build again.

I've go south of the border for this one. Keep an eye on this one.

Right now practically a monopoly situation with competition a long way off (both geographically and temporally).
Travel to/from Mexico to N. America and other parts is only increasing.

Mexico is spending $150 million dollars to build a new airport at Riviera Maya, 2 hours drive from Cancun. Currently anybody wanting to go to Riviera Maya flies in to Cancun. Once this airport is built, Cancun air traffic will be cut in half.

This leaves ASR in a bad position. They want to bid in the auction for the airport. The Mexican government may or may not let them bid. If they are allowed to bid, they will be competing against the other airport companies. In addition Carlos Slim has announced that he wants to bid.

ASR has $140 million in cash. They will have to spend all of that and more in order to get the rights to the Riviera Maya airport. If Carlos Slim wants to outbid them, he will.

Even if they win the auction, which would appear to be unlikely, they would be spending all that money in order to keep traffic from getting away. I'm negative on these shares over the next year.

-Big Moat (local monopoly)
-No debt
-sell at less than book
-nice dividend
-potential for growth
sleep well at night with this bad boy in your portfolio

ASR has a strong balance sheet, limited debt, their net profit margin is increasing year over year, and they pay a healthy, consistent dividend. The way ASR held up during the recent swine flu and heavy dividend capture trading leads me to see strong support at current levels with limited downside and huge upswing potential. I interpret the technicals as showing a possible 10-15% lower level from here with a good possibility for a double on ASR within the next 12 months. In short, the potential upside heaviliy outwieghs the possible negatives as I see it.

The company should be able to increase its Return On Equity to the industry average (which is triple what ASR's currently is), especially with tourist interest in the area increasing, where its current Price/Book of 1.31 would look really cheap. The potential upside seems bigger than the potential downside.

Considering Book value, earnings, and market cap...this should beat the market in 5 years.

HG

Travel is down, and will be declining further.

ASR has a monopoly on air traffic into Cancun. The business operates like a toll booth. I don't foresee any major decline in travel to Cancun in spite of the recession. Cancun remains and will remain a popular destination. Management appears wise and owner-friendly. The generous yield seems safe and will help the stock outperform S&P.

Good fundamentals. Low valuation.

Low relative PE, good star ranking, PEG & 09 PE still below normal - bottom fishing 4/20 picks.

High dive, highly rated at investorplace and msn

A guess on the time frame, but I just returned from Cancun a week or so ago, and my conversations with the drivers and workers at our hotel indicated business on the up-swing. The airport was humming, and we got to the airport well in advance of departure--which is great for ASR's business. ASR is a Cancun play. Maybe a slowdown if people who want to travel now don't have passports. Country well prepared for flu--dare I say perhaps better than U.S.? Tollgate business alive and well, great dividend, stable income play (with perhaps hiccups!). Destination stock not so tied to consumer concerns--hey they're on vacation!

Rated 5 stars.

buy on dip

ASR is a great stock with great upside, just not one of my top picks.