Wednesday 4 December 2013

Analysis of Fraport

A German airport management company

Company: Fraport

Business: A German airport management company. They are running several airports and have three areas of expertise: Ground Services (taking care of all the airport infrastructure (baggage handling, transportation etc.) to make sure that the airlines are happy with the service they receive), Consulting (offer consulting regarding airport infrastructure, retail etc.) and finally Airport Retailing (keeping attractive shops and restaurants etc.)

Active: They are active on four continents. In terms of fully own airports they have five in Europe, five airports in Asia, two in Africa and one in South America. Besides form this they also one shares of several other airports around the world.

P/E: 21.0

contrarian values of P/E, P/B, ROE as well as dividend
The P/E for Fraport is far too high with 21 and the P/B is also too high with 1.7 which leads to that Graham would have had little interest in the company. Their earnings to sales are however pretty ok with 10% but the ROE is bad with only 8.2%. The book to debt is also not so nice with a ratio of 0.4 but I guess building airports are simply expensive. In the last five years they have had a yearly growth of 3% which then leads to a motivated P/E of around 12 to 15 which means that today the shares are overvalued by the market. They pay a dividend that is too little for me with 2.3% which also represents 48% of their earnings so a pretty large chunk.

Conclusion: I did not even think about these type of companies existing and it is very exciting to go through the companies that are on the MDax here in Germany. However both Graham and I consider this company to be far too expensive today and do not see it as a good investment.

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