Post by scissors14on Sep 16, 2006 2:07pm
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Post# 11373824
Morningstar On ASR
Morningstar On ASRGrupo Aeroportuario del Sureste (ASR):
We recently initiated coverage on this fantastic little wide-moat firm--otherwise known as ASUR--and we've also added it to the International Stalwarts watch list in StockInvestor. ASUR is one of only two wide-moat emerging-markets stocks in Morningstar's coverage universe. ASUR is the sole operator of nine airports in southeast Mexico, including its flagship airport in the vacation destination of Cancun, which boasts the most international tourist traffic of any airport in Latin America.
This company is essentially a monopoly; there are no competitor airports in its region, and it has a license from the Mexican government that allows it to operate its airports for more than 40 more years. About three fourths of its sales come from passenger fees, which are regulated by the government. The remaining fourth of its sales, from things like food and shopping, are unregulated and highly profitable because of the inherent captivity of travelers who are less price-sensitive. (Even a cheapskate like me will pay $3 for a $1 hamburger at O'Hare when I'm hungry.)
It's hard not to like the financial position and profitability of this firm. ASUR is in excellent financial shape, carrying no debt on its balance sheet. It also boasts very handsome operating and free cash flow margins.
While the firm isn't quite cheap enough at this writing to qualify for our 5-star rating, it won't take much of a hiccup for this company to fall into buying range. That said, we do recommend waiting for a large margin of safety for this firm because it's subject to the cyclical nature of tourism, combined with weather-related risks and the possibility that the Mexican government will build a competing airport in Cancun as it said it might do.