Grupo Aeroportuario del Surest, a long-term favourite of Murray International (MYI ) fund manager Bruce Stout, has seen its shares shed almost 20% following fee changes by Mexico’s civil aviation regulator.

The company, which holds long-term concessions to manage airports in Mexico’s leading tourist resorts and major cities, was the second largest holding in the £1.5bn global equity income trust at the end of August at 4.6% of assets. Stout, who is retiring next year, has been a long-term advocate of Grupo. He has held it in the trust since Grupo’s IPO in 2000, and it has been a top three holding since at least 2013.

On Wednesday Mexican airport companies flagged there were fees changes by the regulator, which took effect immediately, but did not give further details and said they were evaluating the impact of the changes. The news shook the market as analysts speculated the change could be cuts to airport use fees that passengers pay in the country, which would hit the companies’ profitability and generation of free cash flow.

Grupo shares slid from 435 MXN to a low of 324 MXN before rebounding slightly to trade at 362 MXN, 19.8% down, or 89 points, from the start of the week. Its performance, along with the other major airport operators, pushed Mexico’s main stock index to its worst day since January 2021 on Thursday.

Murray International said it would provide comment once there was more clarity on the proposed changes.

Stout and co-managers Martin Connaghan and Samantha Fitzpatrick have one other Mexican equity holding, personal care and household product manufacturer, Kimberly Clark de Mexico which makes up 1.9% of the portfolio.

Both the Mexican holdings were strong contributors to the 6.6% portfolio returns posted in the last interim report for the six months to the end of June. However, the trust underperformed in that period delivering a total underlying return of 2.2% while the FTSE All-World benchmark index gained 7.9%. The shares have fallen 4.5% this week and are down 11% this year on a 9% discount below net asset value.

Stout, who has had a 20-year stint as lead fund manager of the trust, has outperformed the index in the long term with 545% total underlying returns and 590% share price returns compared to the index’s 531%, according to Morningstar. 

The manager, who has consistently warned about the pitfalls of excessive leverage and debt throughout his career, will hand over the reins to his co-managers in June 2024.

Murray International under Stout 

Source: Morningstar