IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>The independent expert (IE) considers the offer to be fair and reasonable. We think that IE’s valuation approach is sound.  </li>
<li>The key condition is the scheme approval by shareholders. The scheme meeting is scheduled for 11 am on 3 February 2022 and the implementation date is 9 March 2022. </li>
<li>We continue to think that offer is attractive. At last close prices, the gross spread is 2.1% and the annualised spread to the implementation date is 9.9%. </li>
</ul>


The independent expert (IE) considers the offer to be fair and reasonable. We think that IE’s valuation approach is sound.  
The key condition is the scheme approval by shareholders. The scheme meeting is scheduled for 11 am on 3 February 2022 and the implementation date is 9 March 2022. 
We continue to think that offer is attractive. At last close prices, the gross spread is 2.1% and the annualised spread to the implementation date is 9.9%. 


Sydney Airport Scheme Meeting on 3 Feb 2022, IE Opinion

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

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

China Travel International Investment Hong Kong / Equity Bottom-Up

China Travel International Investment Hong Kong

<ul>
<li>Share price of <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment Hong Kong (308 HK)</a> (CTII) rallied by 20% over the last 10 trading days but we see good room for more to come.</li>
<li>Our view is that HK-China border opening, revival in domestic tourism, supportive measures and upgrade in attractions are some key drivers for an increasing positive outlook.</li>
<li>At 0.45x 12-month forward P/B (1.5SD below average), there is significant potential for re-rating. Its net cash of HK$0.40/share, or 30% of share price, adds further comfort to us.</li>
</ul>


Share price of China Travel International Investment Hong Kong (308 HK) (CTII) rallied by 20% over the last 10 trading days but we see good room for more to come.
Our view is that HK-China border opening, revival in domestic tourism, supportive measures and upgrade in attractions are some key drivers for an increasing positive outlook.
At 0.45x 12-month forward P/B (1.5SD below average), there is significant potential for re-rating. Its net cash of HK$0.40/share, or 30% of share price, adds further comfort to us.


China Travel Intl Inv (308 HK): Here Comes My Turn!

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

Beijing Capital International Airport Company Limited operates both aeronautical and non-aeronautical business in the Beijing airport.  The Company provides aircraft movement and passenger service facilities, safety and security services, fire-fighting services, and ground handling services.  In addition, Beijing Capital operates duty free and other retail shops and leases properties.

Beijing Capital International Airport (BCIA) (694 HK)

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Beijing Capital International Airport (BCIA) (694 HK)

Sydney Airport Scheme Meeting on 3 Feb 2022, IE Opinion

We continue to think that offer is attractive. At last close prices, the gross spread is 2.1% and the annualised spread to the implementation date...

Arun George

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

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 Travel Intl Inv (308 HK): Here Comes My Turn!

HK-China border opening, revival in domestic tourism, supportive measures and upgrade in attractions are some key drivers for an increasing...

Osbert Tang, CFA

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

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