Macro is overriding the underlying fundamentals

The recent investor briefing reaffirmed our view that Sydney Airport (SYD) is a high quality, well-managed infrastructure asset. Growth prospects driven by broad-based international passenger growth and expansion of commercial activities are solid. The balance sheet is strong, with significant additional debt capacity within the current credit rating. Interest costs will likely decline into FY17 while refinancing risk is low due to long debt tenors and staggered debt maturities. SYD's share price is down ~16% from its all-time high in late July. This coincided with the Government long bond rates rising ~50bps off all-time lows to ~2.3% pa. The risk-free assumption in our DCF discount rate is 3.5% pa, conservatively above the spot rate. SYD's 5.1% yield with forecast high single/low double digit compound growth in cashflow and DPS remains attractive. We expect fundamentals will drive share price recovery over the medium-term. See our recommendation here: (VIEW LINK)