HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.</li>
<li>While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.</li>
<li>We like OTAs including <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a> and <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> despite their YTD surge in share prices. Meanwhile, <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> stays as the top pick.</li>
</ul>


Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.
While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.
We like OTAs including Tongcheng Travel (780 HK) and Trip.com (9961 HK) despite their YTD surge in share prices. Meanwhile, Air China Ltd (H) (753 HK) stays as the top pick.


China Tourism and Hospitality Industry: Roundup of a Solid CNY

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>China's outbound tourism recovery started much later than others in the region</li>
<li>In particular, Taiwan &amp; Korea began ramping outbound travel earlier (in Q222)</li>
<li>As destinations, Thailand &amp; Vietnam recovered early, but now lag HK's growth</li>
</ul>


China's outbound tourism recovery started much later than others in the region
In particular, Taiwan &amp; Korea began ramping outbound travel earlier (in Q222)
As destinations, Thailand &amp; Vietnam recovered early, but now lag HK's growth


China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

<ul>
<li>Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   </li>
<li>All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend </li>
<li>Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  </li>
</ul>


Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   
All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend 
Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  


Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

<ul>
<li>The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.</li>
<li>A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.</li>
<li>This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. </li>
</ul>


The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.
A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.
This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. 


Chinese Airlines: Well Placed for a Reversal

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

Skymark Airlines / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/skymark-airlines-inc" target="_blank" data-smartkarma-citation="entities:20430:1" rel="noopener">Skymark Airlines (9204 JP)</a> raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th Jun 2023.</li>
<li>Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.</li>
<li>In this note, we will talk about the lock-up dynamics and updates since our last note.</li>
</ul>



Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th Jun 2023.
Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.
In this note, we will talk about the lock-up dynamics and updates since our last note.


Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Hong Kong

China Merchants Holdings International Company Limited, through its subsidiaries and associated companies, operates container and cargo terminals, port transportation, and airport cargo handling.  The Company also manufactures containers, paint, and trailers as well as operates toll road, shipping, property, and dealing securities businesses.

SITC International Holdings Company Ltd. offers marine shipping services.  The Company offers container liner shipping, freight forwarding, customs clearance, shipping agency, and ship brokerage services.  SITC operates in Asia.

Orient Overseas International Ltd, through its subsidiaries, owns and leases ships, operates terminals, and provides freight forwarding and container transportation services.  The Company also develops and invests in properties, leases equipment, and invests in securities.

Shenzhen International Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides investment, construction, and operation of logistic infrastructure facilities, as well as offers value-added logistic services. Shenzhen International serves customers worldwide.

COSCO Shipping Ports Limited, through its subsidiaries, provides shipping container leasing services worldwide.  The Company also operates container terminals and provides container handling, storage, transportation and management services, as well as depot handling and stevedoring services.

Kerry Logistics Network Limited provides logistics services in Asia and internationally. The Company offers integrated logistics services, as well as leases warehousing space in Hong Kong and provides international freight forwarding services.

Pacific Basin Shipping Limited, through its subsidiaries, provides marine transportation services and logistical support to its customers through the commercial operation of a large, modern, and uniformly-sized fleet of shallow-draft Handysize dry bulk carriers.

COSCO SHIPPING International (Hong Kong) Co., Ltd. provides shipping related services. The Company offers shipping, logistics, shipbuilding and ship repair services, ship trading agency services, marine insurance brokerage services, marine equipment and spare parts, coating products, and marine fuel and other related shipping products. COSCO International serves clients around the world.

Yuexiu Transport Infrastructure Ltd., through its subsidiaries, invests in, develops, operates, and manages toll highways, expressways, and bridges in China.

Yuexiu Transport Infrastructure (1052 HK)

Tianjin Port Development Holdings Limited operates container terminals in China.  The company provides container handling operations, stacking and warehousing services and non-containerized cargo services.

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.

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.

Japan Airlines Co. Ltd. provides air transportation services. The Company offers a variety of scheduled  flights and unscheduled flights throughout the world as well as offers air courier services. Japan Airlines also provides tickets, resort hotels, and travel agencies services.

American Airlines Group Inc. operates an airline that provides scheduled passenger, freight, and mail service throughout North America, the Caribbean, Latin America, Europe, and the Pacific.  The Company also provides connecting service throughout the United States, Canada, and the Caribbean.

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.

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

Alaska Air Group, Inc. is an airline holding company. The Company, through its subsidiaries, provides air service to passengers in multiple destinations. Alaska Air also provide freight and mail services, primarily to and within the state of Alaska and on the West Coast.

EVA Airways Corp. is an air carrier that transports passengers and cargos. The Company operates primarily in Taiwan and serves international route networks in North America, Asia, Europe, and Australasia.

Deutsche Lufthansa Aktiengesellschaft provides passenger and cargo air transportation services worldwide. The Company offers flight and connection programs in North America, Scandinavia, and Asia. Deutsche Lufthansa also provides travel agency, catering, and aircraft maintenance services.

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)

China Tourism and Hospitality Industry: Roundup of a Solid CNY

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

In this insight we compare China's progress toward restoring outbound tourism activity to the progress shown by other major tourist sources in the...

Tracking Traffic

Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mohshin Aziz

Chinese Airlines: Well Placed for a Reversal

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th...

Ethan Aw

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52-week Range

Market Cap (USDm)

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China Tourism and Hospitality Industry: Roundup of a Solid CNY

​China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

In this insight we compare China's progress toward restoring outbound tourism activity to the progress shown by other major tourist sources in the...

Tracking Traffic

Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

​Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mohshin Aziz

Chinese Airlines: Well Placed for a Reversal

​Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th...

Ethan Aw

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...