Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<div>Adding Indonesia to the current 8 countries that Singapore has a reciprocal Green Lane travel arrangement with, we should expect an increase in mobility in Singapore as Indonesia contributes to the second largest number of tourists in Singapore besides China. There is also a pilot project of the travel bubble with Hong Kong that requires no 14-day quarantine. </div>
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<div>The shift WFO from WFH is not losing any momentum but slowly increasing. Majority Singaporeans uses public transport to go to work compared to private vehicles (public transport is the largest revenue contributor to Comfort Delgro). Phase III of COVID-19 reopening creates higher mobility from the higher number of participants allowed in various events including weddings and religious services. </div>
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<div>Let's not be fooled by the increase in the company's increase in PER, the increase was caused by the low earnings rather than an increase in share price thus for investors who have not have <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> in the portfolio, they still have a chance to do it. </div>

Adding Indonesia to the current 8 countries that Singapore has a reciprocal Green Lane travel arrangement with, we should expect an increase in mobility in Singapore as Indonesia contributes to the second largest number of tourists in Singapore besides China. There is also a pilot project of the travel bubble with Hong Kong that requires no 14-day quarantine. 

The shift WFO from WFH is not losing any momentum but slowly increasing. Majority Singaporeans uses public transport to go to work compared to private vehicles (public transport is the largest revenue contributor to Comfort Delgro). Phase III of COVID-19 reopening creates higher mobility from the higher number of participants allowed in various events including weddings and religious services. 

Let's not be fooled by the increase in the company's increase in PER, the increase was caused by the low earnings rather than an increase in share price thus for investors who have not have Comfortdelgro Corp (CD SP) in the portfolio, they still have a chance to do it. 

ComfortDelgro (CD): Higher Mobility Expected

HK/China Equity Long-Short

Osbert Tang, CFA

China Southern Airlines / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a> has caught up in its passenger traffic in Sep with a 27.5% YoY decline, compared with -32.2% for <a href="https://www.smartkarma.com/entities/china-eastern-airlines-co-h" target="_blank" data-smartkarma-citation="entities:1079:1" rel="noopener">China Eastern Airlines Co (H) (670 HK)</a> and -38.6% for <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a>. More importantly, domestic passenger traffic reached a growth of 1.6% YoY, suggesting a full recovery in last month. CSA also performed well on capacity management - achieving the best passenger, cargo and overall load factors for Sep and 9M20 among the big three. </p><p>We expect the good traffic recovery, solid load factors, QoQ increase in average fare and sharp appreciation in Rmb will support encouraging bottom line rebound in 3Q20, with a slight potential of reporting a profit in the quarter. In our view, CSA remains inexpensive at 0.8x 12-month forward P/B given its underlying recovery momentum and below-average valuation. </p>

China Southern Airlines (1055 HK) has caught up in its passenger traffic in Sep with a 27.5% YoY decline, compared with -32.2% for China Eastern Airlines Co (H) (670 HK) and -38.6% for Air China Ltd (H) (753 HK). More importantly, domestic passenger traffic reached a growth of 1.6% YoY, suggesting a full recovery in last month. CSA also performed well on capacity management - achieving the best passenger, cargo and overall load factors for Sep and 9M20 among the big three. We expect the good traffic recovery, solid load factors, QoQ increase in average fare and sharp appreciation in Rmb will support encouraging bottom line rebound in 3Q20, with a slight potential of reporting a profit in the quarter. In our view, CSA remains inexpensive at 0.8x 12-month forward P/B given its underlying recovery momentum and below-average valuation. 

China Southern Airlines (1055 HK): Impressive Sep Sets Strong Tone for 4Q20

Shanghai International Airport / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a> witnessed sustained strength on its domestic and cargo throughput in Sep, outperforming both <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> and <a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital International Airport (BCIA) (694 HK)</a> by very significant margins. In fact, SIAC is the only airport among the big three to consecutive YoY growth in domestic passenger traffic in the last two months. </p><p>In Sep, domestic aircraft movement surged 18.9% YoY and domestic passenger throughput grew 13.5% YoY, and both are impressive turnouts. In our view, the strong domestic performance, good demand during the "double festival" Golden Week and China International Import Expo to be held in Shanghai during 5-10 Nov should ensure continued strength in SIAC's traffic in 4Q20.</p>

Shanghai International Airport (600009 CH) witnessed sustained strength on its domestic and cargo throughput in Sep, outperforming both Guangzhou Baiyun International Airport (600004 CH) and Beijing Capital International Airport (BCIA) (694 HK) by very significant margins. In fact, SIAC is the only airport among the big three to consecutive YoY growth in domestic passenger traffic in the last two months. In Sep, domestic aircraft movement surged 18.9% YoY and domestic passenger throughput grew 13.5% YoY, and both are impressive turnouts. In our view, the strong domestic performance, good demand during the "double festival" Golden Week and China International Import Expo to be held in Shanghai during 5-10 Nov should ensure continued strength in SIAC's traffic in 4Q20.

Shanghai International Airport (600009 CH): Best Momentum Against Peers in Sep

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<p>Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period <em>declined</em> by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. </p>
<p>Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.</p>
<p>But we disagree.</p>
<p>In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. </p>
<p>A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.  </p>

Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period declined by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. 
Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.
But we disagree.
In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. 
A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.  

China's 'Golden Week': Headline Tourism Numbers Hardly Shine

Guangzhou Baiyun International Airport / Equity Bottom-Up

<p>There is full recovery in both domestic aircraft movement and passenger throughput at <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> in Sep, which registered YoY growth of 8.5% and 0.7%, respectively. The figures suggested further strength in the domestic market and should reflect positively on a QoQ in GBIA's profitability improvement. Also, the initial figures for the Golden Week have pointed to a 4.9% higher daily aircraft movement and 8.2% higher daily passenger throughput than the average in Sep. </p><p>We believe the rebound of international passenger will be an increasingly important driver for GBIA's traffic recovery over the next 12 months. For example, <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a> has already increased its international flights departing from Guangzhou from 16 in Sep to 20 in Oct. GBIA has also obtained approval for non-public issuance of A-shares to its parent to raise fresh equity of Rmb3.2bn, and we believe these are all positive developments for the company.</p>

There is full recovery in both domestic aircraft movement and passenger throughput at Guangzhou Baiyun International Airport (600004 CH) in Sep, which registered YoY growth of 8.5% and 0.7%, respectively. The figures suggested further strength in the domestic market and should reflect positively on a QoQ in GBIA's profitability improvement. Also, the initial figures for the Golden Week have pointed to a 4.9% higher daily aircraft movement and 8.2% higher daily passenger throughput than the average in Sep. We believe the rebound of international passenger will be an increasingly important driver for GBIA's traffic recovery over the next 12 months. For example, China Southern Airlines (1055 HK) has already increased its international flights departing from Guangzhou from 16 in Sep to 20 in Oct. GBIA has also obtained approval for non-public issuance of A-shares to its parent to raise fresh equity of Rmb3.2bn, and we believe these are all positive developments for the company.

Guangzhou Baiyun Intl Airport (600004 CH): Sep Marked the First Dual YoY Growth

China

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

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China Southern Airlines (1055 HK)

ComfortDelgro (CD): Higher Mobility Expected

HK-SG travel bubble, Phase III, higher mobility in workplace are key catalysts to start accumulating ComfortDelgro's shares now.

Henry Soediarko