Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

Hainan Meilan International Airport / Equity Bottom-Up

<ul>
<li>Strong passenger traffic year-to-date indicates that full-year passenger throughput for 2023 will be on par with 2019.</li>
<li>Concerns that China resuming outbound travel could turn domestic tourists away from Hainan are overblown, overlooking the huge pent-up leisure travel demand over last three years.</li>
<li>We expect investors will focus on pace and sustainability of the recovery when company announces 2022 results. Being eligible for Stock Connect Program in 2023 will be a key catalyst. </li>
</ul>


Strong passenger traffic year-to-date indicates that full-year passenger throughput for 2023 will be on par with 2019.
Concerns that China resuming outbound travel could turn domestic tourists away from Hainan are overblown, overlooking the huge pent-up leisure travel demand over last three years.
We expect investors will focus on pace and sustainability of the recovery when company announces 2022 results. Being eligible for Stock Connect Program in 2023 will be a key catalyst. 


Meilan Airport (357 HK): Takeaway from Recent Passenger Throughput

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

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has received a binding proposal and entered a scheme implementation deed (SID) with the Sydney Aviation Alliance consortium.The offer price is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.UniSuper will reinvest its 15.01% equity interest for an equivalent equity interest in the consortium’s holding vehicle. The scheme is conditional on shareholder approval, ACCC approval, FIRB approval and EU merger clearance. The scheme meeting is scheduled for 24 January 2022 with an implementation date of 21 February 2022.  <div class="content-highlight">The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.46, the gross spread is 3.4% and the annualised spread to the implementation date is 12.3%.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has received a binding proposal and entered a scheme implementation deed (SID) with the Sydney Aviation Alliance consortium.The offer price is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.UniSuper will reinvest its 15.01% equity interest for an equivalent equity interest in the consortium’s holding vehicle. The scheme is conditional on shareholder approval, ACCC approval, FIRB approval and EU merger clearance. The scheme meeting is scheduled for 24 January 2022 with an implementation date of 21 February 2022.  The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.46, the gross spread is 3.4% and the annualised spread to the implementation date is 12.3%.

Sydney Airport Enters a Scheme Implementation Deed

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has granted a consortium (Sydney Aviation Alliance) non-exclusive due diligence access based on a further revised indicative proposal of A$8.75 cash per share. The revised indicative offer is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The revised indicative offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.Pushing for a better price is part of the M&amp;A game. The Board were said to be seeking a price around A$9.00 per share, according to press reports. However, the Board faced increasing shareholder pushback to engage with the consortium and facilitate due diligence. The consortium viewed A$9.00 per share as excessive but shareholder feedback suggested that the price of A$8.75 per share would get the Board onside. UniSuper, the largest independent shareholder, will rollover its shares instead of receiving cash under the scheme and will be required to vote as a separate class on the scheme. The Board intends to recommend the revised offer subject to a binding scheme implementation agreement and no superior offer. The due diligence which is expected to take four weeks should be relatively straightforward due to the consortium’s expertise in airport infrastructure. The deal requires regulatory approval from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board. The ACCC will commence a review of the proposed transaction “in due course” and the review should take about three months to complete. The shareholder vote for approval is likely to be held in 1Q22. <div class="content-highlight">Overall, we think that the further revised indicative offer is attractive and marginally above the pre-COVID-19 rights adjusted share price high reached in December 2019. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.23, the shares are trading at a 6.3% gross spread to the indicative offer.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has granted a consortium (Sydney Aviation Alliance) non-exclusive due diligence access based on a further revised indicative proposal of A$8.75 cash per share. The revised indicative offer is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The revised indicative offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.Pushing for a better price is part of the M&amp;A game. The Board were said to be seeking a price around A$9.00 per share, according to press reports. However, the Board faced increasing shareholder pushback to engage with the consortium and facilitate due diligence. The consortium viewed A$9.00 per share as excessive but shareholder feedback suggested that the price of A$8.75 per share would get the Board onside. UniSuper, the largest independent shareholder, will rollover its shares instead of receiving cash under the scheme and will be required to vote as a separate class on the scheme. The Board intends to recommend the revised offer subject to a binding scheme implementation agreement and no superior offer. The due diligence which is expected to take four weeks should be relatively straightforward due to the consortium’s expertise in airport infrastructure. The deal requires regulatory approval from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board. The ACCC will commence a review of the proposed transaction “in due course” and the review should take about three months to complete. The shareholder vote for approval is likely to be held in 1Q22. Overall, we think that the further revised indicative offer is attractive and marginally above the pre-COVID-19 rights adjusted share price high reached in December 2019. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.23, the shares are trading at a 6.3% gross spread to the indicative offer.

Sydney Airport’s Further Revised Offer Gets the Board’s Approval

<a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has rejected a revised conditional, non-binding indicative offer of A$8.45 per share from a consortium (Sydney Aviation Alliance). The revised indicative offer of A$8.45 per share is a 45% premium to the unaffected price of A$5.81 (2 July). The revised indicative offer is also a marginal 2.4% bump to the original offer of A$8.25 per share received from the consortium on 5 July. The Board rejected the revised offer as it continues to undervalue Sydney Airport and is opportunistic considering the COVID-19 pandemic. The Board argues that Sydney Airport has a 74-year lease on one of Australia’s most important valuable pieces of infrastructure. Pushing for a better price is part of the M&amp;A game. The consortium responded to the Board’s rejection by warning that they are prepared to walk away but at the same time failing to declare that the A$8.45 per share revised offer was its final offer. The Board is open to engaging with the consortium if they lift the offer and is said to be seeking a price around A$9.00 per share, according to press reports. The issue is complicated by the different methodologies used by the Board and the consortium to determine the rights adjusted share price to account for the dilutive raise in August 2020. The Board also argues that any proposal should be benchmarked against the pre-COVID share price high of A$9.20 per share reached on 6 December 2019. We think that the revised indicative offer is in line with the pre-COVID-19 rights adjusted share price high reached in December 2019. The Board is facing increasing shareholder pushback to at least engage with the consortium and facilitate due diligence. UniSuper, the largest shareholder, has branded the rejection of the revised offer as “disappointing” and wants the Board to engage with the consortium.<div class="content-highlight">Overall, the gamesmanship suggests both sides are now invested in securing a deal and the 6.5% valuation differential (A$9.00 Board’s value vs A$8.45 bid) suggest the two sides are not far apart on price. At the last close price of A$7.70, the shares are trading at a 9.7% gross spread to the revised indicative offer. The interim results will be announced on 20 August before market open.</div>

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has rejected a revised conditional, non-binding indicative offer of A$8.45 per share from a consortium (Sydney Aviation Alliance). The revised indicative offer of A$8.45 per share is a 45% premium to the unaffected price of A$5.81 (2 July). The revised indicative offer is also a marginal 2.4% bump to the original offer of A$8.25 per share received from the consortium on 5 July. The Board rejected the revised offer as it continues to undervalue Sydney Airport and is opportunistic considering the COVID-19 pandemic. The Board argues that Sydney Airport has a 74-year lease on one of Australia’s most important valuable pieces of infrastructure. Pushing for a better price is part of the M&amp;A game. The consortium responded to the Board’s rejection by warning that they are prepared to walk away but at the same time failing to declare that the A$8.45 per share revised offer was its final offer. The Board is open to engaging with the consortium if they lift the offer and is said to be seeking a price around A$9.00 per share, according to press reports. The issue is complicated by the different methodologies used by the Board and the consortium to determine the rights adjusted share price to account for the dilutive raise in August 2020. The Board also argues that any proposal should be benchmarked against the pre-COVID share price high of A$9.20 per share reached on 6 December 2019. We think that the revised indicative offer is in line with the pre-COVID-19 rights adjusted share price high reached in December 2019. The Board is facing increasing shareholder pushback to at least engage with the consortium and facilitate due diligence. UniSuper, the largest shareholder, has branded the rejection of the revised offer as “disappointing” and wants the Board to engage with the consortium.Overall, the gamesmanship suggests both sides are now invested in securing a deal and the 6.5% valuation differential (A$9.00 Board’s value vs A$8.45 bid) suggest the two sides are not far apart on price. At the last close price of A$7.70, the shares are trading at a 9.7% gross spread to the revised indicative offer. The interim results will be announced on 20 August before market open.

Sydney Airport's Rejection of a Revised Offer Is Likely Not the Final Act

China

Hainan Meilan International Airport Company Limited provides airfield services, terminal facilities, ground handling services, passenger and cargo handling services. The Company also leases commercial and retail space at the Meilan Airport, operates airport-related business franchising, advertising, car parking, tourism services, and sells duty-free and consumable goods.

Hainan Meilan International Airport (357 HK)

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Hainan Meilan International Airport (357 HK)

Meilan Airport (357 HK): Takeaway from Recent Passenger Throughput

YTD passenger traffic indicates full-year throughput for 2023 will be on par with 2019. Concerns about outbound travel turning tourists away from...

Eric Chen

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

Sydney Airport Enters a Scheme Implementation Deed

Sydney Airport has entered a SID with the Sydney Aviation Alliance at A$8.75 per share. At the last close, the gross spread is 3.4% and the...

Arun George

Sydney Airport’s Further Revised Offer Gets the Board’s Approval

Sydney Airport has granted DD to a Sydney Aviation Alliance based on a revised price of A$8.75. The offer is attractive and at the last price of...

Arun George

Sydney Airport's Rejection of a Revised Offer Is Likely Not the Final Act

The Board rejects a revised offer of A$8.45, a 2.4% bump to the previous offer. At the last close price of A$7.70, the shares are trading at a...

Arun George

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