In today’s daily we have covered stock research on Sydney Airport (HOLD). 









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The S&P 500 was down by 22.08points or 1.15%on Friday to 1906.13 points. Volatility has suddenly returned to U.S. stocks. While the S&P 500 is still up 3.1 percent for the year, the index is off about 5 percent from its record high reached in mid-September, and closed out this week at the lowest level since May 23. The S&P 500 and Nasdaq posted their biggest weekly declines since May 2012, and the Dow Jones industrial average ended Friday in negative territory for the year.

Growing worry over Europe and other overseas economies has money managers concerned about earnings season. The next two weeks bring a slew of U.S. corporate results, including from S&P 500 companies with some of the highest levels of sales abroad, such as chip maker Intel Corp. Stocks are declining as the Fed winds down its third round of bond buying under quantitative easing. 





SPX Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by 108.4points or 2.05% on Friday and closed at 5188.3 points. Whitehaven Coal was the hardest hit, shedding 8.8 per cent to $1.50, extending its losses for the week to 13.5 per cent. Wesfarmers, which has a coal business in addition to its retail empire, also finished the week lower, easing 3.7 per cent to $40.83. Chicago Board of Options Exchange Volatility Index, surged as much as 28 per cent to 19.38, its highest level since February.

Energy stocks were also dragged into the selloff. Woodside Petroleum and Santos fell 2.7 per cent and 3.5 per cent to $38.70 and $12.59 respectively. BHP Billiton fell 2.7 per cent to $32.31, extending its losses for the week to 3.4 per cent. Rival Rio Tinto finished the week down 2.6 per cent to $57.26. The Australian dollar was trading at US86.85¢ at about 8.45am AEST on Saturday, down from US87.79¢ at Friday’s local close. The iron ore price closed up $1.36, or 1.72 per cent, at $80.24. The following stocks will trade ex-dividend today: AMA Group, Magellan Flagship fund, Vealls Ltd, WAM Active, WAM Research.

 

ASX 200 Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-




 
 
Stock of the Day – Sydney Airport (Hold)
SYD released its traffic statistics for August with International up 1.8% and Domestic rising 0.7%. Total traffic rose 1.0%. International traffic growth benefitted load factor improvement and strong growth from Taiwan (+24%), China (+18%) and India (+16%). The weakest markets were Indonesia, Malaysia and Singapore which fell 26%, 23% and 11% respectively. The declines were due to the cycling of the Eid festival which occurred in July this year.


Passenger Numbers August 2014 (Source - Company Reports)

We continue to expect International growth to be supported by aircraft upgauges and new services and by load factor improvement as new capacity grains traction. We are confident in the outlook for the remainder of the year due to load factor improvement and new services (Cebu Pacific began a four weekly service in September and plans to ramp up to five weekly in December and Philippines Airlines plans to go from four weekly to five weekly from October).


Half-Year 2014 Highlights (Source - Company Reports)

Domestic traffic growth remains subdued and looks likely to stay that way with Qantas guiding to flat capacity growth in 2HCY14 and Virgin failing to give guidance over coming periods  though we understand tiger has added some capacity which may elicit a response from Jetstar and bump up the growth rate slightly. Melbourne airport has also released its traffic data with International Traffic again outperforming SYD, up 6.5% and the domestic up 0.6%.



SYD Daily Chart (Source - Thomson Reuters)

SYD is leveraged to international passenger growth and has achieved this from diverse sources. Domestic outbound demand as well as rising demand from Chinese, Indian and Southeast Asian tourists is driving growth in both aeronautical and retail earnings. SYD will renegotiate its international carrier aeronautical agreements this year. SYD holds first right of refusal to develop a second airport in Sydney at Badgerys’s Creek. While this investment will carry a long lead time it presents a major opportunity to deploy capital and reorganized its business for further profitability. We put a HOLD recommendation on the stock at the current price.

 

 
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