On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Japan Airport Terminal Co., Ltd (9706:JP) (OTC: JTTRY), assigning a Neutral rating to the company's shares with a price target of JPY5,400.00. The financial institution anticipates the company to perform strongly, achieving earnings that surpass the pre-pandemic levels. This forecast is supported by the expansion of international airport capacity and increased spending per capita on duty-free retail at Haneda Airport.
The analyst at Goldman Sachs noted limited potential for the stock's valuation to rise above the current consensus. The firm's earnings projections for the fiscal years ending March 2025 to 2027 are modestly higher, with operational profit estimates at +5%, +1%, and +6% respectively, compared to the Bloomberg consensus. The caution stems from expected fluctuations in per-capita spending, which faces competitive pressure from Chinese e-commerce platforms.
Despite these concerns, Goldman Sachs sees a promising outlook for Japan Airport Terminal's free cash flow generation beginning in the fiscal year ending March 2027. This projection is based on the assumption that capital expenditures will revert to maintenance levels after a period of significant investment.
Additionally, the analyst highlighted Japan Airport Terminal's strategic shareholdings, which are among the highest on the Tokyo Stock Exchange, at approximately 40%. There is an expectation that the company may adopt a more proactive approach in enhancing shareholder returns as part of its upcoming medium-term plan, which is set to commence from the fiscal year ending March 2027. Goldman Sachs forecasts a total payout ratio increase to 50% from the current level of over 30%.
The coverage initiation by Goldman Sachs provides investors with an overview of Japan Airport Terminal's financial health and future prospects, particularly focusing on the company's potential for solid earnings and free cash flow in the coming years.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.