RBC hikes Auckland Airport price target after equity raise announcement
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More news: RBC Capital Markets analysts raised their Auckland International Airport price target 2.9% from NZ$8.50 ($7.80) to NZ$8.75 ($8.03), after the airport announced a NZ$1.4 billion equity raise today.
The analysts also reaffirmed their 'outperform' rating on the stock.
RBC analyst Owen Birrell noted that the capital raising "comes as no surprise" but presents both a "sizeable liquidity event" and a "major de-risking event", with the airport having both signed its domestic terminal contract and funded it.
Dual-listed Auckland Airport shares remain in a trading halt on the ASX at $6.95 per share, pending completion of its NZ$1.2 billion placement, expected to be announced on Tuesday.
Auckland Airport launches $1.3b equity raise
The news: Auckland International Airport has announced a NZD1.4 billion ($1.3 billion) equity raise to fund a planned capital investment programme, including the construction and delivery of a new domestic jet terminal.
The numbers: The ASX- and NZX-listed airport said the equity raise comprises an underwritten placement of NZD1.2 billion and a non-underwritten retail offer to raise up to NZD200 million.
The placement will comprise the issue of around 172.7 million new shares, representing approximately 11.7% of current issued capital. The company said the issue price of NZD6.95 per share represents a 7% discount to the ex-dividend-adjusted last closed price of NZD7.48 per share on 13 September.
The retail offer will enable eligible existing Auckland Airport shareholders to subscribe for shares of up to NZD150,000 for New Zealand-based shareholders, and $45,500 for Australia-based shareholders. The price of shares in the retail offer will be the lower of the placement price and a 2.5% discount to the stock's five-day volume-weighted average price.
The proceeds of the raise will be used to reduce net debt, repay a NZD150 million October 2024 bond maturity and a further NZD100 million of unhedged drawn facilities, and provide flexibility to fund Auckland Airport's planned capital investment programme until 2032.
The context: The raise follows Auckland Airport's new contract with Downer Group's subsidiary construction company Hawkins, to manage the construction and delivery of a new domestic jet terminal, integrating domestic jet and international services "under one roof".
The Hawkins contract, worth around NZD800 million, forms part of the overall planned NZD2.2 billion domestic jet terminal build, alongside the airfield, integrated baggage systems and associated facilities.
Auckland Airport said the domestic jet terminal project is a "significant element" of its terminal integration programme and of the wider NZD6.6 billion planned aeronautical capital investment programme.
The investment in the new domestic jet terminal, alongside other elements of the capital investment programme, will see Auckland Airport replace ageing infrastructure to cater for expected growth in passenger demand and reduce connection times between flights.
Auckland Airport's shares have entered a trading halt on the ASX and NZX until the earlier of the start of trading on Wednesday or completion of the placement, expected to be announced on Tuesday. The company has also temporarily suspended its dividend reinvestment plan due to the timing of the equity raise.
What they said: "We're pleased to announce that we have partnered with Hawkins on the delivery of the domestic jet terminal building — the most significant element in Auckland Airport's ongoing upgrade," said CEO Carrie Hurihanganui.
"It's investment for the coming decades and beyond, creating essential resilience, greater capacity, improved processing for domestic jet travellers and their baggage, and a greater experience for everyone who travels, visits and works in our aviation precinct," she said.
The sources: ASX announcement, ASX announcement, ASX announcement, RBC Capital Markets research
