Sydney Airport Bonds
This week Money asks FIIG where to invest and its pick is Sydney Airport Bonds.
Sydney Airport has eight Australian dollar bonds available for investment in the over-the-counter market. The two we like are the 2020 and 2030 inflation-linked capital index bonds.
With these types of bonds, variations in inflation during the life of the bond are added to and subtracted from the capital price of the bond, known as the "adjusted capital price".
Interest is fixed but calculated on the adjusted capital price, so increases if inflation is positive. At maturity investors receive the $100 issue value plus the cumulative impact of inflation over the life of the bond. Both bonds are considered low risk.
Sydney Airport is about 8km from the CBD and is regarded as Australia's international tourism gateway and primary airport.
It is also a major employer in NSW and makes a significant contribution to the local and national economies, estimated at $8 billion directly and $16.5 billion when flow-on effects are considered.
This contribution is equivalent to 6% of the NSW economy and translates into more than 75,000 direct jobs and 131,000 indirect jobs.
Key financials 2014-15
- Revenue increased 5.6% to $1.23 billion, while EBITDA (earnings before interest, taxes, depreciation and amortisation) was up 5.8% to $1 billion.
- Total passenger growth was 3%, with international passenger growth particularly strong at 4.3%.
- Aeronautical revenue up 6.8% to $606.7 million.
- Car parking revenue up 7.6%, driven by healthy growth (33%) in online bookings.
- Total interest coverage continues to improve, from 2.32 times to 2.45. There was a temporary increase in the net debt/EBITDA ratio from 6.9 to 7.4 due to drawdown for the terminal 3 acquisition.
Minimum investment per bond is $10,000, with an upfront minimum of $50,000.
FIIG is a dealer and we take a small brokerage fee when we transact - this is already included in the yield to maturity returns quoted. A custody service fee is also charged.
- Inflation-linked bond maturing November 20, 2020, with an expected yield to maturity of 2.69%* a year; available to retail and wholesale investors.
- Inflation-linked bond maturing November 20, 2030, with an expected yield to maturity of 3.37%* a year; available to retail and wholesale investors. * Indicative yield to maturity assuming inflation averages 2.5% over the life of the bond (being the Reserve Bank target mid-point of between 2% and 3%) and is subject to change.