For ASUR, we arrive at a US$265/ADR target price using DCF analysis. Our DCF assumes that: (1) the company’s Mexican airport concessions expire in 2048E; (2) the San Juan concession expires in 2053E; (3) Airplan expires in 2040E; and (4) a WACC of 10.6%.

We see key risks to the achievement of our ASUR target price as follows: (1) exposure to the Atlantic Hurricane season for San Juan, Cancún, and Cozumel; (2) irrational capacity decisions by host airlines; (3) macro risks, especially those that can impact aviation; and (4) regulatory risks, including future officials reducing allowable returns on RAB. 

Upside risks include: (1) traffic growth and margins for San Juan and Colombia could improve more rapidly than we expect; and (2) positive macro factors (favorable FX, lower jet fuel prices, etc). 

If the impact from the above turns out to be greater/less than we expect, the shares could fail to achieve/exceed our target price.