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Is Auckland International Airport Limited (NZE:AIA) A Financially Sound Company?

Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Auckland International Airport Limited (NZSE:AIA), with a market capitalization of NZ$7.51B, rarely draw their attention from the investing community. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine AIA’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into AIA here. View our latest analysis for Auckland International Airport

Does AIA generate an acceptable amount of cash through operations?

AIA has built up its total debt levels in the last twelve months, from NZ$1.94B to NZ$2.10B , which comprises of short- and long-term debt. With this rise in debt, AIA’s cash and short-term investments stands at NZ$45.70M for investing into the business. Additionally, AIA has produced NZ$307.10M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 14.65%, meaning that AIA’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In AIA’s case, it is able to generate 0.15x cash from its debt capital.

Can AIA pay its short-term liabilities?

With current liabilities at NZ$563.50M, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.18x, which is below the prudent industry ratio of 3x.

NZSE:AIA Historical Debt Mar 8th 18
NZSE:AIA Historical Debt Mar 8th 18

Does AIA face the risk of succumbing to its debt-load?

AIA is a relatively highly levered company with a debt-to-equity of 55.76%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can test if AIA’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For AIA, the ratio of 5.41x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

AIA’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. In addition to this, its lack of liquidity raises questions over current asset management practices for the mid-cap. This is only a rough assessment of financial health, and I’m sure AIA has company-specific issues impacting its capital structure decisions. I suggest you continue to research Auckland International Airport to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AIA’s future growth? Take a look at our free research report of analyst consensus for AIA’s outlook.

  2. Historical Performance: What has AIA’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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