Sydney Airport poised for terminal growth

UBS analysts reckon Sydney Airport will yield a 9 per cent return from its $535 million acquisition of Qantas' T3 Terminal in the first year after the deal.
UBS analysts reckon Sydney Airport will yield a 9 per cent return from its $535 million acquisition of Qantas' T3 Terminal in the first year after the deal.
The airport operator announced the deal on Tuesday when it reported a 6.4 per cent rise in half-year earnings before interest, tax, depreciation and amortisation to $488.3 million.
UBS analyst Simon Mitchell and his team said the 9 per cent return figure assumed incremental EBITDA of $50 million in the first- year, and acquisition funding mostly comprised of debt at an incremental cost of 6 per cent to 7 per cent.
"This therefore generates cashflow accretion, and we have bought forward the accretion we had originally incorporated on expiry of the lease in 2019 to 2016," Mitchell said in a research note to clients.
"This together with greater confidence in the international passenger outlook drives a 2-3% upgrade to our cashflow per share forecasts over the next couple of years."
The analyst said Sydney Airport's share price had been tempered by uncertainty around the company's involvement in the city's proposed second airport at Badgerys Creek in Western Sydney.
More details about Badgerys Creek are expected in mid to late 2016.