The Secret’s Out: Buy This Unique Infrastructure Stock Before Wall Street Goes Down

The SPAC boom of the 2020-2022 era flooded the market with a lot of early-stage businesses, and to put it mildly, many of them did not perform well for investors. However, these blank check companies have also brought some solid businesses to market, and one we have invested in is an aviation infrastructure company. Sky Harbor (SKYH 3.78%).

Sky Harbor’s business consists of building and operating hangar campuses for the private aviation industry at airports in the United States. The business is starting to generate serious revenue from its initial campuses and has several more under construction and various stages of development. At a share price not much higher than its initial valuation, Sky Harbor could be a smart stock to snap up now.

Great growth progress

Sky Harbor currently has four airport campuses in operation, including:

• Sugar Land Regional Airport (Houston)
• Nashville International Airport
• Miami Opa-Locka Executive Airport
• Mineta International Airport (San Jose)

These campuses have enabled the company to generate approximately $11 million in revenue over the past four quarters. While that sounds like a lot for a $785 million company, and it is, there are a few things to know.

There are currently campuses under development at nine additional airports, including three airports in the New York area. Management recently announced the airport’s 14th campus, Salt Lake City International Airport. When all Sky Harbor campuses under development are completed, the company expects a portfolio of 2.4 million square feet.

Sky Harbor doesn’t expect to stop there, aiming to build a portfolio of around fifty airports in the not-too-distant future. In fact, by the end of 2025, the company aims to announce at least eight additional land leases, which would bring the number of announced projects to 22.

In short, don’t put too much emphasis on your current income number. It reflects only a small part of the company’s active development pipeline. It certainly shows that there is demand for the product, but it does not yet reflect the earning potential of the company’s invested capital. In fact, management believes the 14 projects in operation or development will generate more than $120 million in annual revenue when completed, and that doesn’t include projects yet to be announced.

Fantastic economy and a great opportunity

One important thing investors need to understand is the unique and fantastic economics of the private hangar business. It is not well understood because frankly there are no other listed private aviation campus developers.

First, although revenues are low (for now), the business is already approaching profitability. In fact, management expects to produce positive operating cash flow starting in the fall of 2025 as more campuses come online.

Sky Harbor expects 14% gross returns from the first 20 locations, which would become a 35% return on the project’s equity, factoring in debt. In addition, management sees several adjacent revenue streams that it could capitalize on as its properties are built, including fuel, insurance, aircraft brokerage, maintenance and more.

Another key differentiator is that because its projects are considered public infrastructure, it can take advantage of raising capital through tax-exempt municipal bonds. They have very low rates compared to most conventional loan options and also have long terms, so Sky Harbor doesn’t have to worry about short-term debt maturities.

An under-the-radar stock, but for how long?

The opportunity here could be massive. Even 50 airports might be a conservative target from a long-term perspective. Hangar space is limited in many business aviation hubs, and demand is growing much faster than new supply.

Sky Harbor is still an early stage business in terms of numbers. But this is a company that’s chasing a massive untapped opportunity that has tremendous profit potential and might be worth a closer look before more on Wall Street starts to take notice.