HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Cathay Pacific Airways / Equity Bottom-Up

<ul>
<li>With more foreign countries being granted visa-free visits to China, <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> will benefit from more transfer traffic via Hong Kong.</li>
<li>Recovery is decent with passenger traffic rising 37.5% in 5M24. CX's capacity already returned to 80% of pre-pandemic in 2Q24, and this will reach 100% in 1Q25. </li>
<li>YTD, CX is still a laggard relative to many global airlines. Its P/B valuation is not stretched at 0.8x, given ROE of 11% over the next 3 years.  </li>
</ul>


With more foreign countries being granted visa-free visits to China, Cathay Pacific Airways (293 HK) will benefit from more transfer traffic via Hong Kong.
Recovery is decent with passenger traffic rising 37.5% in 5M24. CX's capacity already returned to 80% of pre-pandemic in 2Q24, and this will reach 100% in 1Q25. 
YTD, CX is still a laggard relative to many global airlines. Its P/B valuation is not stretched at 0.8x, given ROE of 11% over the next 3 years.  


Cathay Pacific (293 HK): Multiple Positive Developments

Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

<ul>
<li>JAL finishing FY24 strongly with another guidance upgrade – upgraded FY26 targets more logical in light of existing ANA targets</li>
<li>​Demand momentum particularly helpful as wages rise across Japan and ​cost control to remain impressive over FY25-FY26 as LCC growth set to dilute FSC inflation</li>
<li>​Detailed analysis of JAL’s widening margin gap to ANA suggests revenue solution required – momentum helpful and needs to be watched carefully</li>
</ul>


JAL finishing FY24 strongly with another guidance upgrade – upgraded FY26 targets more logical in light of existing ANA targets
​Demand momentum particularly helpful as wages rise across Japan and ​cost control to remain impressive over FY25-FY26 as LCC growth set to dilute FSC inflation
​Detailed analysis of JAL’s widening margin gap to ANA suggests revenue solution required – momentum helpful and needs to be watched carefully


Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<ul>
<li>Amidst intense competition in online mall retailing, JAL and ANA both launched their own e-commerce malls last year to replace once popular catalogues.</li>
<li>Although a tough market to enter given the competition from the big 3 (Amazon, Rakuten and Yahoo), airlines have distinct advantages over other small malls.</li>
<li>In particular, they have data on millions of consumers and access to premium customers willing to spend ¥1 million on a case of wine.</li>
</ul>


Amidst intense competition in online mall retailing, JAL and ANA both launched their own e-commerce malls last year to replace once popular catalogues.
Although a tough market to enter given the competition from the big 3 (Amazon, Rakuten and Yahoo), airlines have distinct advantages over other small malls.
In particular, they have data on millions of consumers and access to premium customers willing to spend ¥1 million on a case of wine.


<ul>
<li>We refresh estimates for ANA and JAL, and highlight we think the strength of FY24 makes it difficult for ANA to avoid an earnings decline in FY25.</li>
<li>However, ANA's superior recovery to JAL poses bigger questions for JAL as it revisits its medium term plan on 21 March</li>
<li>Our deep dive on margin management at each carrier suggests a revenue problem rather than a cost problem at JAL; but without revenue improvements, it will have to cut costs</li>
</ul>


We refresh estimates for ANA and JAL, and highlight we think the strength of FY24 makes it difficult for ANA to avoid an earnings decline in FY25.
However, ANA's superior recovery to JAL poses bigger questions for JAL as it revisits its medium term plan on 21 March
Our deep dive on margin management at each carrier suggests a revenue problem rather than a cost problem at JAL; but without revenue improvements, it will have to cut costs


Japanese Airlines – ANA’s Margin Outperformance Poses Big Questions for JAL

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

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.

Equity Capital Markets

Renesas Electronics / Equity Capital Markets

<ul>
<li>INCJ aims to raise around US$1.8bn via a secondary sell-down in <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a>. This will be a clean-up trade as INCJ has been paring down its stake. </li>
<li>The deal is a slightly large one to digest at 12 days of three month ADV and around 6% of current mcap.</li>
<li>In this note, we will talk about the placement and run the deal through our ECM framework.</li>
</ul>


INCJ aims to raise around US$1.8bn via a secondary sell-down in Renesas Electronics (6723 JP). This will be a clean-up trade as INCJ has been paring down its stake. 
The deal is a slightly large one to digest at 12 days of three month ADV and around 6% of current mcap.
In this note, we will talk about the placement and run the deal through our ECM framework.


Renesas Electronics Placement - Well Flagged US$1.8bn Deal, Accelerated but Index Flows Should Help

Japan

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.

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Ana Holdings (9202 JP)

Cathay Pacific (293 HK): Multiple Positive Developments

As more countries gain visa-free access to China, CX will benefit from increased transfer traffic. CX's recovery is on track with passenger...

Osbert Tang, CFA

Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

Detailed analysis of JAL's medium term plan update, FY24-FY26 earnings prospects, and widening margin gap to principal competitor All Nippon Airways

Neil Glynn

JAL Mall: Gold from 30m Mileage Members

JAL and ANA enter online retail market with e-commerce malls, leveraging customer data and premium clientele to compete with big players like...

Michael Causton

Japanese Airlines – ANA’s Margin Outperformance Poses Big Questions for JAL

A deep dive on ANA and JAL analysing the drivers of ANA's superior financial recover to JAL and the implications for JAL's medium term strategy...

Neil Glynn

Renesas Electronics Placement - Well Flagged US$1.8bn Deal, Accelerated but Index Flows Should Help

INCJ aims to raise around US$1.8bn via a secondary sell-down in Renesas Electronics (6723 JP). This will be a clean-up trade as INCJ has been...

Ethan Aw

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Cathay Pacific (293 HK): Multiple Positive Developments

​As more countries gain visa-free access to China, CX will benefit from increased transfer traffic. CX's recovery is on track with passenger...

Osbert Tang, CFA

Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

Detailed analysis of JAL's medium term plan update, FY24-FY26 earnings prospects, and widening margin gap to principal competitor All Nippon Airways

Neil Glynn

JAL Mall: Gold from 30m Mileage Members

​JAL and ANA enter online retail market with e-commerce malls, leveraging customer data and premium clientele to compete with big players like...

Michael Causton

Japanese Airlines – ANA’s Margin Outperformance Poses Big Questions for JAL

A deep dive on ANA and JAL analysing the drivers of ANA's superior financial recover to JAL and the implications for JAL's medium term strategy...

Neil Glynn

Renesas Electronics Placement - Well Flagged US$1.8bn Deal, Accelerated but Index Flows Should Help

INCJ aims to raise around US$1.8bn via a secondary sell-down in Renesas Electronics (6723 JP). This will be a clean-up trade as INCJ has been...

Ethan Aw

As more countries gain visa-free access to China, CX will benefit from increased transfer traffic. CX's recovery is on track with passenger...

JAL and ANA enter online retail market with e-commerce malls, leveraging customer data and premium clientele to compete with big players like...