HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Beijing Capital International Airport (BCIA) / Equity Bottom-Up

Beijing Capital International Airport (BCIA)

<ul>
<li>We think there should not be much positive effect on <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> from Winter Olympics and Paralympics. We expect near-term downside pressure on share price.</li>
<li>Higher operating costs, revenue waivers and tighter traffic control are likely to impair the profitability in next year, as evidenced by the precedent case in the 2008 Beijing Olympics. </li>
<li>While share price has been weak YTD, BCIA is likely to sustain losses into FY22, meaning further book value erosion. That said, even at 0.83x P/B, there is minimal upside.</li>
</ul>


We think there should not be much positive effect on Beijing Capital International Airport (BCIA) (694 HK) from Winter Olympics and Paralympics. We expect near-term downside pressure on share price.
Higher operating costs, revenue waivers and tighter traffic control are likely to impair the profitability in next year, as evidenced by the precedent case in the 2008 Beijing Olympics. 
While share price has been weak YTD, BCIA is likely to sustain losses into FY22, meaning further book value erosion. That said, even at 0.83x P/B, there is minimal upside.


Beijing Capital Intl Airport (694 HK): Don't Bet on the Winter Olympics

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A/H premium on 134 stocks over the last week. </li>
<li>Consumer staple sector led the A/H increase which was due to Lanzhou Zhuangyuan Pasture, while utilities saw the biggest A/H premium decline among sectors. </li>
<li>We highlight stocks at 52 week high of A/H premium: Tigermed, Zoomlion, Flat Glass, Baiyunshan, Hepalink. Many of these names are in the health care sector. </li>
</ul>


We analyse the changes of A/H premium on 134 stocks over the last week. 
Consumer staple sector led the A/H increase which was due to Lanzhou Zhuangyuan Pasture, while utilities saw the biggest A/H premium decline among sectors. 
We highlight stocks at 52 week high of A/H premium: Tigermed, Zoomlion, Flat Glass, Baiyunshan, Hepalink. Many of these names are in the health care sector. 


A/H Premium Weekly: Tigermed, Zoomlion, Flat Glass, Baiyunshan, Hepalink at 52w High

Shanghai International Airport / Equity Bottom-Up

<ul>
<li>We consider the acquisitions of Hongqiao and related assets at a price tag of Rmb19.1bn as both financially fair for and strategically beneficial to <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>.</li>
<li>The 12.13pp increase in stake by the parent company is a vote of support and confidence, and the acquisitions trimmed its 1H21 loss by 29.8% and lowered LPS by 42.1%.</li>
<li>Profit guarantee for Logistics Company and Advertising Segment by the parent for FY22-24 is very welcomed and translated into undemanding acquisition PERs of 12.8x and 10.2x for FY24F.</li>
</ul>


We consider the acquisitions of Hongqiao and related assets at a price tag of Rmb19.1bn as both financially fair for and strategically beneficial to Shanghai International Airport (600009 CH).
The 12.13pp increase in stake by the parent company is a vote of support and confidence, and the acquisitions trimmed its 1H21 loss by 29.8% and lowered LPS by 42.1%.
Profit guarantee for Logistics Company and Advertising Segment by the parent for FY22-24 is very welcomed and translated into undemanding acquisition PERs of 12.8x and 10.2x for FY24F.


Shanghai International Airport (600009 CH): Hongqiao Acquisitions Are Fair Deals

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Equity Capital Markets

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

<ul>
<li>China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$5bn in its H-share listing in Hong Kong.</li>
<li>As per Frost &amp; Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.</li>
<li>In this note, we will talk about the recent updates and look at the likely valuations.</li>
</ul>


China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$5bn in its H-share listing in Hong Kong.
As per Frost &amp; Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
In this note, we will talk about the recent updates and look at the likely valuations.


China Tourism Group A/​H Listing - Recent Updates and a Quick Look at Valuations

China Southern Airlines / Equity Bottom-Up

<p>The sharp rally in share price of <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> seems to be too excessive as fundamentals are still weak and traffic is facing headwind. While outlook for border opening has improved and collection of fuel surcharges has restarted, we see 4Q21 and early-FY22 stay challenging for China's biggest domestic airline. Its return to loss of Rmb1.4bn in 3Q21, vs. profit of Rmb377m a year ago, is a clear demonstration of the tough operating situation in the near term.</p><p>CSA's number of scheduled flights on China's top five routes has so far averaged at 61 per day for 4Q, down significantly by 34% YoY, and we think this will reflect unfavourably on the 4Q21 result. Market consensus expectation of a profitable 4Q21 looks clearly aggressive given that its loss was Rmb3.3bn in 4Q20. While the latest developments are positive, they are not enough to change the big picture, in our view. Also, <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> is a better play than CSA on China's potential border opening some time in FY22. </p>

The sharp rally in share price of China Southern Airlines (1055 HK) seems to be too excessive as fundamentals are still weak and traffic is facing headwind. While outlook for border opening has improved and collection of fuel surcharges has restarted, we see 4Q21 and early-FY22 stay challenging for China's biggest domestic airline. Its return to loss of Rmb1.4bn in 3Q21, vs. profit of Rmb377m a year ago, is a clear demonstration of the tough operating situation in the near term.CSA's number of scheduled flights on China's top five routes has so far averaged at 61 per day for 4Q, down significantly by 34% YoY, and we think this will reflect unfavourably on the 4Q21 result. Market consensus expectation of a profitable 4Q21 looks clearly aggressive given that its loss was Rmb3.3bn in 4Q20. While the latest developments are positive, they are not enough to change the big picture, in our view. Also, Air China Ltd (H) (753 HK) is a better play than CSA on China's potential border opening some time in FY22. 

China Southern Airlines (1055 HK): Is There More Room to Go?

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.

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry. It offers passenger, cargo, mail delivery, ground, cargo handling, and other extended transportation services.

Air China Limited provides passenger, cargo, and airline-related services in China.  The Company is primarily based in Beijing and a major hub for domestic and international air transportation.  Air China's airline-related services include aircraft maintenance, repair, overhaul service, ground services, and in-flight catering services.

Hainan Airlines Co., Ltd. provides passenger and freight air transportation. The Company also provides charter flight services. 

Spring Airlines Co., Ltd. offers air transportation services. The Company provides domestic air transportation, international air transportation, cargo transportation, and other services. Spring Airlines also offers ticket home delivery, insurance transaction, and other services.

Juneyao Airlines Co. Ltd. supplies air transportation services. The Company provides domestic and international routes for passengers and cargoes. Juneyao Airlines also offers ticket home delivery and electronic ticketing services.

China Express Airlines Co., Ltd. provides air transportation services. The Company offers passenger and freight air transportation, aviation equipment maintenance and aircraft leasing, ticket and hotel booking, consulting, and other services. China Express Airlines serves customers worldwide.

China Express Airlines Co Ltd (002928 CH)

COSCO SHIPPING Holdings Co., Ltd offers marine freight transportation services.  The Company offers container shipping, dry bulk shipping, logistics services, freight forwarding, and terminal and container leasing services internationally.  COSCO SHIPPING Holdings Co., Ltd operates container ships and terminals, and manufactures shipping containers.

S.F. Holding Co., Ltd operates as a holding company. The Company, through its subsidiaries, provides logistics, order tracking, supply chain management, and warehousing services. S.F. Holding operates worldwide.

Daqin Railway Co., Ltd. mainly provides coal transportation service in Northern China. It also operates passenger transportation business.

Singapore Airlines Limited provides air transportation, engineering, pilot training, air charter, and tour wholesaling services. The Company's airline operation covers Asia, Europe, the Americas, South West Pacific, and Africa.

ANA Holdings Inc provides a variety of air transportation-related services. The Company offers scheduled & unscheduled air passenger services and air courier services. ANA sells aircraft parts and provides travel arrangement & reservation services as well.

United Airlines Holdings Inc is an airline holding company.  The Company owns and operates airlines that transports persons, property and mail throughout the United States and abroad.

Southwest Airlines Co. is a domestic airline that provides primarily short-haul, high-frequency, point-to-point service.  The Company offers flights throughout the United States.

International Consolidated Airlines Group S.A. provides transportation services. The Company offers international and domestic air passenger and cargo transportation services. International Consolidated Airlines Group serves customers worldwide.

International Consolidated Airlines Group (IAG LN)

International Consolidated Airlines Group

LATAM Airlines Group S.A. is an airline that provides both domestic and international flight services.  The Company provides passenger and cargo services to destinations in Chile, South America, the Caribbean, Europe, North America, and the Pacific.  LATAM Airlines operates passenger aircraft and cargo freighters.

InterGlobe Aviation Limited provides passenger airlines services. The Company offers ground management, air transportation, terminal maintenance, and other services. InterGlobe Aviation conducts its business globally.

Turk Hava Yollari Anonim Ortakligi (THY), also known as Turkish Airlines, provides passenger and cargo air transportation services. The Company serves all domestic destinations as well as the Middle East, North America, Europe, Asia, North Africa and South Africa.

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

Qantas Airways Limited provides transportation of passengers through two airlines including Qantas (full service carrier) and Jetstar (low cost carrier), operating international, domestic and regional services. The Company also includes Qantas Frequent Flyer and Qantas Freight which generates diverse revenue streams and adds value for customers and investors.

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Air China Ltd (A) (601111 CH)

Beijing Capital Intl Airport (694 HK): Don't Bet on the Winter Olympics

We expect BCIA's traffic and cost to be negatively, rather than positively, affected by the Winter Olympics and Paralympics to be held in Feb and...

Osbert Tang, CFA

A/H Premium Weekly: Tigermed, Zoomlion, Flat Glass, Baiyunshan, Hepalink at 52w High

We look at the changes in A/H premium in the last week. We highlight consumer staple sector and utilities sector, and stocks including Tigermed,...

Ke Yan, CFA, FRM

Shanghai International Airport (600009 CH): Hongqiao Acquisitions Are Fair Deals

The acquisitions of Hongqiao and related assets will enhance bottom line in next two years. The parent's profit guarantees and increase in stake...

Osbert Tang, CFA

China Tourism Group A/H Listing - Recent Updates and a Quick Look at Valuations

China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$5bn in its H-share listing in Hong Kong. In this note we talk about...

Sumeet Singh

China Southern Airlines (1055 HK): Is There More Room to Go?

Recent rally seems to be more than enough to reflect on the latest news of COVID-19 drug development, collection of fuel surcharges and potential...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Beijing Capital Intl Airport (694 HK): Don't Bet on the Winter Olympics

We expect BCIA's traffic and cost to be negatively, rather than positively, affected by the Winter Olympics and Paralympics to be held in Feb and...

Osbert Tang, CFA

A/H Premium Weekly: Tigermed, Zoomlion, Flat Glass, Baiyunshan, Hepalink at 52w High

We look at the changes in A/H premium in the last week. We highlight consumer staple sector and utilities sector, and stocks including Tigermed,...

Ke Yan, CFA, FRM

Shanghai International Airport (600009 CH): Hongqiao Acquisitions Are Fair Deals

The acquisitions of Hongqiao and related assets will enhance bottom line in next two years. The parent's profit guarantees and increase in stake...

Osbert Tang, CFA

China Tourism Group A/​H Listing - Recent Updates and a Quick Look at Valuations

China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$5bn in its H-share listing in Hong Kong. In this note we talk about...

Sumeet Singh

China Southern Airlines (1055 HK): Is There More Room to Go?

Recent rally seems to be more than enough to reflect on the latest news of COVID-19 drug development, collection of fuel surcharges and potential...

Osbert Tang, CFA

China Tourism Group A/H Listing - Recent Updates and a Quick Look at Valuations