In today’s briefing:
- 2024 High Conviction: Air China (753 HK) – Update on Proposed Share Placement
- Qantas Airways (QAN AU | BUY | TP:AU$6.58): Smooth Operator
2024 High Conviction: Air China (753 HK) – Update on Proposed Share Placement
- Air China (H) (753 HK) is proposing a new share placement to raise Rmb6bn and HK$2bn. EPS dilution is manageable at 6% so we view the proposal positively.
- The new equity will enhance book value by 11.5% and lower its gearing by 103pp to 399.8%. The full subscription by the parent is also a vote of confidence.
- Recent share price weakness is due to the overall weakness in the Chinese equity market, but both macro and operating environments are improving. Selldown is unjustified.
Qantas Airways (QAN AU | BUY | TP:AU$6.58): Smooth Operator
- Qantas Airways (QAN AU) (QAN) is enjoying the best time of its life on industry consolidation benefits, demand exceeding supply to many sectors, and flourishing air cargo
- Domestic Australia is an ironclad goldmine, with a benign competitive environment as the archrival is busy restructuring. International sector capacity deployment is picking up, but still deep in underserved territory
- Target price AUD6.58 (+23% UPSIDE), based on 7x CY2024 PE – long-term historical mean. AUD500 million share buyback should provide downside support
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