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>Share price of <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> underperformed that 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 (753 HK)</a> by wide margin in this year, which we believe is not justified.</li>
<li>Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.</li>
<li>The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.</li>
</ul>


Share price of Beijing Capital International Airport (BCIA) (694 HK) underperformed that for Air China Ltd (753 HK) by wide margin in this year, which we believe is not justified.
Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.
The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.


Beijing Capital Intl Airport (694 HK): Preparing to Take Off

<ul>
<li>Sequential passenger traffic improvement makes us believe that the worst was over for <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China (753 HK)</a>. We expect it continues the YTD outperformance vs. <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a>. </li>
<li>With the pandemic under control and government's focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.</li>
<li>Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific Airways (293 HK)</a> which now anticipates lower losses YoY in 1H22.</li>
</ul>


Sequential passenger traffic improvement makes us believe that the worst was over for Air China (753 HK). We expect it continues the YTD outperformance vs. Air China Ltd (753 HK). 
With the pandemic under control and government's focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.
Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit Cathay Pacific Airways (293 HK) which now anticipates lower losses YoY in 1H22.


Air China (753 HK): Positioned to Ride on the Coming Upturn

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

<ul>
<li>National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.</li>
<li>The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.</li>
<li>Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake</li>
</ul>


National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.
The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.
Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake


Air China to Take Over Embattled Regional Airline

Cross Asset Strategy

<ul><li>In Depth: Millions of China’s migrant workers find themselves shunned in old age</li><li>China’s manufacturing activity shrinks for third month amid Covid controls, Caixin PMI shows</li><li>China expands tax cuts to autos with bigger engines</li></ul>

In Depth: Millions of China’s migrant workers find themselves shunned in old ageChina’s manufacturing activity shrinks for third month amid Covid controls, Caixin PMI showsChina expands tax cuts to autos with bigger engines

CX Daily: Millions of China’s Migrant Workers Find Themselves Shunned in Old Age

<ul>
<li>
<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> has weaker passenger traffic in Mar and 1Q22 when compared with <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>, and this is mostly due to the Olympics.</li>
<li>We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a> has also seen good pick-up in Mar. </li>
<li>Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.</li>
</ul>



Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar. 
Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.


Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors

China

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.

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Air China Ltd (H) (753 HK)

Beijing Capital Intl Airport (694 HK): Preparing to Take Off

BCIA's underperformance against Air China in this year provides room for it to catch up, especially given the recovery of domestic traffic, revival...

Osbert Tang, CFA

Air China (753 HK): Positioned to Ride on the Coming Upturn

Air China starts to feel the bottoming-out of passenger traffic in May. The pandemic has now under control and with more relaxation in quarantine...

Osbert Tang, CFA

Air China to Take Over Embattled Regional Airline

National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional...

Caixin Global

CX Daily: Millions of China’s Migrant Workers Find Themselves Shunned in Old Age

In Depth: Millions of China’s migrant workers find themselves shunned in old age. China’s manufacturing activity shrinks for third month amid Covid...

Caixin Global

Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors

Air China will see the negative factors affecting its 1Q22 traffic fade in the next few months. More relaxations of quarantine requirements for...

Osbert Tang, CFA

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