On Tuesday, RBC Capital Markets adjusted its outlook on Auckland Airport (AIA:NZ) (OTC: ACKDF) shares, increasing the price target to AUD8.75, up from the previous AUD8.50. The firm maintained its Outperform rating on the stock. The revision follows Auckland Airport's announcement of a NZ$1.4 billion equity raise aimed at funding its NZ$6.6 billion capital expenditure program for airport development stages known as PSE4 and PSE5.
The equity raise is part of Auckland Airport's strategy to preserve its A- credit rating during the significant capital expenditure period ahead. The company's management had previously indicated the possibility of such a capital raising effort, making the announcement expected by market observers.
The funding is considered a critical step for Auckland Airport, as it will provide substantial liquidity and significantly reduce financial risk. This is largely due to the airport having already secured a contract for its domestic terminal and ensuring the project's funding. The capital raise is seen as a move to strengthen the airport's financial position as it embarks on the expansive development program.
RBC Capital Markets views the capital raising initiative as a dual benefit for Auckland Airport. It not only offers a considerable liquidity event but also represents a major de-risking milestone for the company. This is because Auckland Airport has both finalized the contract for its domestic terminal and secured the necessary funding for it.
The firm's Outperform rating suggests confidence in Auckland Airport's future performance, especially in light of the steps taken to manage its capital expenditure and credit standing. The increased price target to AUD8.75 reflects this positive outlook and the anticipated benefits of the capital development program.
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