Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

Cathay Pacific Airways / Equity Bottom-Up

<ul>
<li>1HFY24 net profit declined -15% YoY to HK$3.4 billion, in-line with consensus </li>
<li>Interim dividend of HK$0.20/share, at 38% payout ratio. Typically, Cathay pays 50% payout ratio, and we can expect final dividend to be much larger</li>
<li>Maintain BUY with target price of HK$9.90 (+26% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). </li>
</ul>


1HFY24 net profit declined -15% YoY to HK$3.4 billion, in-line with consensus 
Interim dividend of HK$0.20/share, at 38% payout ratio. Typically, Cathay pays 50% payout ratio, and we can expect final dividend to be much larger
Maintain BUY with target price of HK$9.90 (+26% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). 


Cathay Pacific (293 HK, BUY, TP:9.90HKD): Decent Results, Stay the Course

<ul>
<li>Operations are on track with earlier guidance given during FY23 results, loads and yields are healthy, with UK and North American performing better than expected  </li>
<li>Will buyback and cancel remaining 97.7m preference shares for a sum of HKD10b by end of July 2024. Shareholder dilution has been avoided  </li>
<li>Cathay Pacific is a value BUY, our target price of HK$9.90 (+24% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival <a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a> </li>
</ul>


Operations are on track with earlier guidance given during FY23 results, loads and yields are healthy, with UK and North American performing better than expected  
Will buyback and cancel remaining 97.7m preference shares for a sum of HKD10b by end of July 2024. Shareholder dilution has been avoided  
Cathay Pacific is a value BUY, our target price of HK$9.90 (+24% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP) 


HK/China Equity Long-Short

Osbert Tang, CFA

<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

<ul>
<li>FY23 net profit of HKD9.1b, easily beating the consensus forecast of HKD8.5b, and announced a surprise dividend, the first since 2019, signally pandemic effects are over </li>
<li>Perfect execution from the team, leveraging on a strong market </li>
<li>Cathay Pacific is a value <strong>BUY</strong>, our target price of HK$9.90 (+10% UPSIDE) implies 10x FY2024 PE. We will update more after tuning in the 2 pm analyst briefing </li>
</ul>


FY23 net profit of HKD9.1b, easily beating the consensus forecast of HKD8.5b, and announced a surprise dividend, the first since 2019, signally pandemic effects are over 
Perfect execution from the team, leveraging on a strong market 
Cathay Pacific is a value BUY, our target price of HK$9.90 (+10% UPSIDE) implies 10x FY2024 PE. We will update more after tuning in the 2 pm analyst briefing 


Cathay Pacific (293 HK, BUY, TP HK$9.90): FY23 Better than Expected, and Surprise Dividends

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>2023 results came in broadly in line with expectations but included a concerning step up in ex-fuel unit cost inflation.</li>
<li>We cut our 2024 EBITDAR by 10% to HK$22.2bn, which drives net income down 21% to HK$6.6bn, leaving us well below consensus.</li>
<li>We revisit Cathay's margin generation problems from the last cycle, illustrating structural problems which require structural solutions.</li>
</ul>


2023 results came in broadly in line with expectations but included a concerning step up in ex-fuel unit cost inflation.
We cut our 2024 EBITDAR by 10% to HK$22.2bn, which drives net income down 21% to HK$6.6bn, leaving us well below consensus.
We revisit Cathay's margin generation problems from the last cycle, illustrating structural problems which require structural solutions.


Cathay Pacific – Rising Inflationary Pressure Expedites Earnings Normalisation

Hong Kong

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

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Cathay Pacific Airways (293 HK)

Cathay Pacific (293 HK, BUY, TP:9.90HKD): Decent Results, Stay the Course

Cathay Pacific's 1HFY24 performance slowed but was within expectations. Results are respectable and valuations remain attractive. Maintain BUY...

Mohshin Aziz

Cathay Pacific (293 HK, BUY, TP:HKD):

Cathay Pacific's operations are exceeding expectations, plans to buyback preference shares and is considered a value buy with a target price of...

Mohshin Aziz

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

Cathay Pacific (293 HK, BUY, TP HK$9.90): FY23 Better than Expected, and Surprise Dividends

Cathay Pacific exceeds profit forecast for FY23, announces surprise dividend, signaling pandemic recovery and strong market performance. Maintain...

Mohshin Aziz

Cathay Pacific – Rising Inflationary Pressure Expedites Earnings Normalisation

FY23 results were greeted with a positive reaction. However, we highlight creeping cost pressure at Cathay which prompts us to expedite earnings...

Neil Glynn

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52-week Range

Market Cap (USDm)

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Cathay Pacific (293 HK, BUY, TP:9.90HKD): Decent Results, Stay the Course

​Cathay Pacific's 1HFY24 performance slowed but was within expectations. Results are respectable and valuations remain attractive. Maintain BUY...

Mohshin Aziz

Cathay Pacific (293 HK, BUY, TP:HKD):

​Cathay Pacific's operations are exceeding expectations, plans to buyback preference shares and is considered a value buy with a target price of...

Mohshin Aziz

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

Cathay Pacific (293 HK, BUY, TP HK$9.90): FY23 Better than Expected, and Surprise Dividends

​Cathay Pacific exceeds profit forecast for FY23, announces surprise dividend, signaling pandemic recovery and strong market performance. Maintain...

Mohshin Aziz

Cathay Pacific – Rising Inflationary Pressure Expedites Earnings Normalisation

FY23 results were greeted with a positive reaction. However, we highlight creeping cost pressure at Cathay which prompts us to expedite earnings...

Neil Glynn

Cathay Pacific's 1HFY24 performance slowed but was within expectations. Results are respectable and valuations remain attractive. Maintain BUY...

Cathay Pacific's operations are exceeding expectations, plans to buyback preference shares and is considered a value buy with a target price of...

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

Cathay Pacific exceeds profit forecast for FY23, announces surprise dividend, signaling pandemic recovery and strong market performance. Maintain...