Passenger growth continues to drive earnings

Sydney Airport reported half-year results last week. The EBITDA result was in-line with our forecast. Passenger growth of 6.7% drove an 11% increase in revenues. We expected that cost growth would be greater than revenue growth in the period, but the front-ending of the guidance cost increase surprised us. EBITDA growth, combined with reduced interest costs on increased debt, resulted in cashflow growth of 18%. July traffic data shows international passenger growth continues to be very strong, while domestic growth has moderated somewhat. While dilutive, the August DRP raised $142m of cash that will help to improve the balance sheet and reduce interest costs. We continue to view Sydney Airport as a core portfolio holding, with international traffic growth a key thematic driving its growth outlook. Strong distribution growth over coming years and a solid and improving balance sheet are further attractions. Read the results update and get the analyst rating here: (VIEW LINK)