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

<a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> rallied 14% on Monday in the US on news that <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a>'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (<a href="https://www.smartkarma.com/entities/american-airlines-group-inc" target="_blank" data-smartkarma-citation="entities:3663:1" rel="noopener">American Airlines Group (AAL US)</a>, +15%) and cruise operators (<a href="https://www.smartkarma.com/entities/royal-caribbean-cruises-ltd" target="_blank" data-smartkarma-citation="entities:1629:1" rel="noopener">Royal Caribbean Cruises (RCL US)</a>, +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits.

Trip.com (TCOM US) rallied 14% on Monday in the US on news that Pfizer Inc (PFE US)'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (American Airlines Group (AAL US), +15%) and cruise operators (Royal Caribbean Cruises (RCL US), +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits. 

Trip.com Rallies 14% on Vaccine News. But What's the 'Normal' We'll Return To in 2021?

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

The Thai government is in talks with China to exempt Chinese tourists from the required 14-day quarantine by 2021. The exemption may push through if the limited reopening of Thailand for international tourism will be a success. The current14-day quarantine will be replaced by coronavirus testing and mobile tracking app.
Chinese tourists accounted for more than 25% of Thailand’s international tourists and maybe the first low-risk country that will sign up for quarantine-free travel. Most Chinese visitors come to Thailand for a week, so being quarantined would not be worth the trip for many. 
The protest in Thailand has not subsided therefore the high pent-up demand from Chinese tourists may have to be reallocated somewhere else. Historically, however, any protests in Thailand did not last long and mostly peaceful thus it may create some opportunity to accumulate <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> stock.

The Thai government is in talks with China to exempt Chinese tourists from the required 14-day quarantine by 2021. The exemption may push through if the limited reopening of Thailand for international tourism will be a success. The current14-day quarantine will be replaced by coronavirus testing and mobile tracking app.
Chinese tourists accounted for more than 25% of Thailand’s international tourists and maybe the first low-risk country that will sign up for quarantine-free travel. Most Chinese visitors come to Thailand for a week, so being quarantined would not be worth the trip for many. 
The protest in Thailand has not subsided therefore the high pent-up demand from Chinese tourists may have to be reallocated somewhere else. Historically, however, any protests in Thailand did not last long and mostly peaceful thus it may create some opportunity to accumulate Airports of Thailand (AOT TB) stock. 

Airport of Thailand (AOT): Soon or Later?

Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period declined by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. 
Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.
But we disagree.
In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. 
A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.

Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period declined by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. 
Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.
But we disagree.
In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. 
A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.  

China's 'Golden Week': Headline Tourism Numbers Hardly Shine

Thematic (Sector/Industry)

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Thai Airways International / Equity Bottom-Up

Five interesting news/developments that could impact Thai equities:<ul>
<li>
Updates on Thai Airways restructuring. The Planner gives out details about potential merger with Thai Smile and who will likely call the shots (bondholders, Boeing, Airbus) in the long run.</li>
<li>
Four New Airports. Bhumjaithai's Transport Minister pushes AOT to expand four more airports even as passenger throughput falls by more than half. Some locations such as Buriram seem politically oriented but make less business sense.</li>
<li>
Debt Exploding, as budget deficits lead Thai government to authorize Bt214bn of new loans. Public debt to GDP could rise to 57% by next year, prompting the State to raise its debt ceiling above 60%.</li>
<li>
Everyone wants power! From PTT to EA, everyone wants a piece of the action in the power sector. Increasing stakes in power companies, running electric ferries on the Chao Phrya, you name it.</li>
<li>
TTA's Ship Comes Home. The shipper is guiding for a strong revenue growth of 31% and expansion of both its fleet and restaurant outlets.</li>
</ul>

Five interesting news/developments that could impact Thai equities:

Updates on Thai Airways restructuring. The Planner gives out details about potential merger with Thai Smile and who will likely call the shots (bondholders, Boeing, Airbus) in the long run.

Four New Airports. Bhumjaithai's Transport Minister pushes AOT to expand four more airports even as passenger throughput falls by more than half. Some locations such as Buriram seem politically oriented but make less business sense.

Debt Exploding, as budget deficits lead Thai government to authorize Bt214bn of new loans. Public debt to GDP could rise to 57% by next year, prompting the State to raise its debt ceiling above 60%.

Everyone wants power! From PTT to EA, everyone wants a piece of the action in the power sector. Increasing stakes in power companies, running electric ferries on the Chao Phrya, you name it.

TTA's Ship Comes Home. The shipper is guiding for a strong revenue growth of 31% and expansion of both its fleet and restaurant outlets.


Snippets #44: More Turbulence at THAI, Four New Airports!

Thailand

Nok Airlines PCL operates as an airline carrier in the aviation industry. The Company provides air transportation services for passengers, baggage, and cargo.

Asia Aviation PCL owns a budget airline.  The airline offers low fare flights, online booking, hospitality packages, and courier and cargo services. Asia Aviation serves travelers throughout Asia, the Middle East, and Europe.

Bangkok Aviation Fuel Services Public Company Limited is provider of aviation fuel services including aviation depot and aircraft refueling services at the Bangkok International Airport (Donmuang) and the New Bangkok International Airport at Suvarnabhumi.

WICE Logistics Public Company Limited provides freight shipping services. The Company offers marine freight shipping, air freight shipping and trucking services.

Triple i Logistics Public Company Limited provides logistics services. The Company offers sea and air freight forwarding, warehousing, distribution, shipping, goods transportation, and container depot services. Triple i Logistics serves customers worldwide.

Namyong Terminal PCL is a roll on roll off terminal operator. The Company offers terminal services, car storage areas and warehousing services in Thailand.

Thoresen Thai Agencies PCL is a maritime and commodity-focused business group with Transport, Energy, and Infrastructure businesses in the Asia-Pacific region. The Group's businesses include dry bulk shipping, inter-island petroleum and gas tankering, offshore oil and gas services, coal mining, fertilizer production and distribution, and integrated port and logistics services.

Bangkok Airways Company Limited offers air transportation services. The Company operates flights and airports to various resort destinations in Thailand, Myanmar, Laos, Cambodia, Vietnam, Malaysia, Singapore, China, and Japan.

Precious Shipping Public Company Limited is a ship owner providing regional marine shipping services. The Company operates in the tramp freight market sector where its vessels are employed on a time charter as well as voyage charter basis.  Precious Shipping has a network of shipping agents worldwide.

Kiattana Transport PCL provides transportation services.

Air Busan Co., Ltd. operates as an airline company. The Company offers international and domestic flight, hotel, and car booking services. Air busan also provides reissuance of ticket, baggage, airport, and in flight services. Air busan offers services worldwide.

AirAsia X Berhad is a long-haul, low-cost airline based in Malaysia. The Company is an affiliate carrier of the AirAsia Group. AirAsia X offers flights on the Airbus A330-300 aircraft on routes beyond 4 hours flight duration across Asia Pacific and the Middle East.

Skymark Airlines Inc. provides air transportation services.  The Company's services include scheduled flights for passengers and air courier services. Skymark Airlines conducts businesses in Japan.

Icelandair Group hf is a holding company.  The Company, through its subsidiaries, offers scheduled air carrier operations, tourist services and transport operations; buys and sells real estate; and conducts credit operations and other related services.  Icelandair flies between Iceland, Western Europe, and North America.

Spirit Airlines Inc. is a low-fare airline based in Miramar, Florida. The Airline provides low-cost travel opportunities principally to and from South Florida, the Caribbean and Latin America. Spirit Airlines basic service combines with a range of optional services for additional fees, targets price sensitive leisure travelers and travelers visiting friends and relatives.

PT Garuda Indonesia Persero Tbk provides airline services. The Company offers domestic and international flights, online check in, and associated services for passengers, baggage, and cargo.

Gol Linhas Aereas Inteligentes S.A. provides low-fare, non-stop passenger flight services through its fleet of next generation Boeing airplanes.  The company provides domestic flights in Brazil.

Alliance Aviation Services Ltd. is a mining services company. The Company specializes in providing transportation by air of its mining and energy customers' employees and contractors to and from remote locations, ad hoc charter services - operating commercial air charters servicing the needs of Government and corporate customers, and wet leasing services.

Cebu Air, Inc. operates an airline under the Cebu Pacific Air name in the Philippines. It offers scheduled air travel services to passengers, as well as airport-to-airport cargo services on its domestic and international routes. The company also provides ancillary services, such as cancellation and rebooking options; in-flight merchandising, including sale of duty-free products on international flights; baggage services; and travel-related products and services. As of December 31, 2015, Cebu Air, Inc. operated a fleet of 55 aircraft, which includes 8 Airbus A319, 33 Airbus A320, 6 Airbus A330, and 8 ATR 72-500 aircraft. The company has a strategic alliance with Tigerair. Cebu Air, Inc. was incorporated in 1988 and is headquartered in Pasay City, the Philippines. Cebu Air, Inc. is a subsidiary of CPAir Holdings, Inc.

Star Flyer Inc. operates as an airline carrier in the aviation industry. The Company provides air transportation services for passengers, baggage, and cargo. Star Flyer also offers shuttle services between key Japanese cities.

Thai Airways International Public Company Limited is Thailand's national airline providing air transportation, freight and mail services on domestic and international routes including Asia, Europe, North America, Africa and South West Pacific.  The Company is a state enterprise which is controlled by the government and partly owned by the public.

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Thai Airways International (THAI TB)

Trip.com Rallies 14% on Vaccine News. But What's the 'Normal' We'll Return To in 2021?

An effective vaccine is part of what will get China and the world back to 'normal' travel demand. But even before Covid19 erupted, Chinese travel...

Tracking Traffic

Airport of Thailand (AOT): Soon or Later?

The Thai government is in talks with China to exempt Chinese tourists from the 14-day quarantine by 2021. The protest will bring weakness to the...

Henry Soediarko

China's 'Golden Week': Headline Tourism Numbers Hardly Shine

Contrary to some, we do not believe headline tourism numbers from the recent Golden Week suggest improving conditions in China's domestic travel...

Tracking Traffic

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

what happened of note? air activity in china and elsewhere hotel room rates conclusions

Tracking Traffic

Snippets #44: More Turbulence at THAI, Four New Airports!

Five interesting

Athaporn Arayasantiparb, CFA

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