BASEL: Dufry, which operates duty-free and retail stores at airports, seaports, and railway stations, could offer an attractive destination for investors.
The Basel, Switzerland–based company, whose network comprises more than 2,200 outlets in 63 countries—including the U.S.-based Hudson Group and its Hudson News chain of newsstands—has expanded rapidly in the past two years. It generates approximately three-quarters of its sales from perfumes and cosmetics, foods, wines and spirits, and tobacco, and it boasts a 24% market share in airport travel retail.
Analysts worry that Dufry (ticker: DUFN.Switzerland) will struggle to grow revenue at a faster pace than passenger traffic, but those fears may be overblown. Air traffic is forecast to grow 4.5% annually for the next 20 years, according to aircraft maker Airbus (AIR.France).
Dufry’s shares, which closed in Zurich Friday at 116.90 Swiss francs ($120.45), have fallen 22% in the past two years, including a 2.8% drop since the start of 2016.
The stock seems inexpensive at 12.2 times estimated 2017 earnings. By comparison, the Stoxx Europe 600 index’s consumer-services sector trades at a far richer 15.9 times. At 15 times next year’s forecast earnings, Dufry’s shares could be worth CHF143.25, more than 20% above the latest price.
Gilles Guibout, a portfolio manager at AXA Investment Managers’ WF Framlington Eurozone fund, sees two drivers for growth at Dufry: rising global demand for air travel boosting the top line, and opportunities to cut costs following a period of rapid expansion.
“To me, it is a pretty straightforward investment case,” says Guibout, who has owned Dufry shares for about six months. He sees a potential upside of about 30% in the next two years.
