Grupo Aeroportuario del Sureste (ASR-NYSE, $227.06 US) Reports Another Earnings Beat for the Quarter Ended 09/30/22.

(All figures converted from MX pesos to USD at the exchange rate of 20.0925 pesos per USD).

Asur reported airport and concession revenues of $290.5 million US for the third quarter of 2022. EBITDA of $202.4 million in the quarter represented a margin of 69.7% and increased from the 67.7% 2021, Q3 quarter, by 3%.

The net profit reported was $126.7 million, for a net, after tax, profit margin of 43.6%. EPS was determined to be $4.22 US per ADS.

This net profit per ADS exceeded the top forecast by 7.1% and the average by 8.8%.

Hotel development and refurbishment up and down the Mayan Riveria, from Cancun to Tulum, continues at a breakneck pace.

Cancun, Isla Mujeres, Puerto Morelos and the Mayan Riveria started out 2022 with more than 744 hotel, resort and tourist accommodations. The majority took advantage of the Covid-19 downturn to modernize, expand or completely rebrand their existing facilities. Dozens of new resorts and more than 7,000 new rooms of capacity have already been added in 2022, with many more resorts to come on-line prior to the end of 2022. I am losing count of the number of new resorts reportedly to come onstream for 2023.

Even the densely packed Cancun hotel zone, which in 2020 had been reported by Fonatur as being too congested for new development, reports permitting underway to build an additional 6,000 rooms, which would present incremental capacity of 16.2% at the city of Cancun in the foreseeable future.

European and Canadian flight additions to the Mexican state of Quintana Roo remain back-ended to the 4th quarter of 2022 and the 1st quarter of 2023.

Canadian tourists accounted for roughly 3.63 million total visits to Mexico in 2019; the lion’s share of trips took place in the Cancun/Mayan Riviera/Yucatan peninsula region. Extrapolating the present rate of growth reported by government of Canada statistics, Mexico seems destined to surpass the 2019 Canadian visitation record. While the 4th quarter traditionally represents an off-peak “shoulder” season for Mexican tourism, it is my view that many foreign travelers to the Mayan Riviera may, as likely as not, head south a bit earlier than prior years.

A net, after tax, profit margin of 43.6%, from a transnational airport business, represents the sort of fiscal result that even drug cartels find difficult to earn all-in (from farm field to end user less shipping losses and expenses incurred for laundering the proceeds) through their transport and sales of illicit drugs.

International traffic to Cancun, to the Mayan Riviera and extending north to the Merida airport remains very strong through Q3. Ample hotel capacity exists to support greater year-round traffic flow to the Mexican Caribbean coastal region. Despite sharply higher ticket prices for airfare, rising lodging and food prices as well as the relatively strong Mexican peso when compared to many key global currencies, there is little sign of any tourist deceleration. I continue to believe that holiday travel to sun destinations is far stickier (demand inelastic) than street analysis models; this recent quarterly result adds credence to my assumption.

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