TOKYO: The plunging yen has sparked a tourism boom in Japan. Last year, more than 13 million people visited Japan, up nearly 20% from 2013. Chinese tourists have been leading the way. Their ranks surged 83% to 2.4 million. Just behind Taiwan and South Korea, China is the country with the third-largest share of tourists visiting Japan.
The growth is set to continue, and is good news for Japan’s airports, and major airport operator Japan Airport Terminal (ticker: 9706.JP ).
With more Chinese travelers coming to Japan, Japan Airport Terminal’s sales and profit are poised to rise, and so, too, will its stock. Morgan Stanley analyst Takuya Osaka forecasts Japan Airport’s earnings per share to grow 33% annually, over the next two years, on 34% annual revenue growth.
At a recent 7,040 yen, the shares don’t look inexpensive, trading for an enterprise value of 18 times next year’s expected Ebitda (earnings before interest, taxes, depreciation and amortization). But in a recent report, Osaka notes that the valuation isn’t stretched, given the growth potential. He values the shares about 10% higher at JPY7,800. His upside scenario puts the value at JPY9,200.
Founded in the 1950s, Japan Airport Terminal handles operations at four Japanese international airports, Tokyo-area, Haneda and Narita, as well as Kansai and Central Japan. Revenue is drawn from a variety of activities, including leasing out office and retail space, merchandise sales from stores, restaurant sales, and parking fees.
This fiscal year, ending in March, JAT could earn JPY10 billion, or JPY130 a share, on revenue of JPY205 billion. In fiscal 2017, earnings could rise 28% to JPY166 a share.
A major growth driver is the international expansion of Haneda airport. Historically, the airport has mainly served as Tokyo’s domestic airport, but in the last five years, Haneda has expanded its international terminal. The airport has also been adding international flights, ahead of the 2020 Tokyo Olympics. Haneda is closer to Tokyo than Narita.
Last month, Japan’s government announced that it would increase flights at Haneda to China by 12 to 20 daily round trip flights, to Beijing, Shanghai, and Guangzhou. The new flights will take effect at the end of October.
