In today’s briefing:
- Asian Dividend Gems: Regional Container Line (RCL)
- Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations
- Copa Holdings – A Slow-Growth Year in 2024 – Impressive Gain on Pre-Pandemic Economics Sustainable?
- Japan Elevator Service Holdings (6544) – Business Model Generating Value and Proving Resilient
Asian Dividend Gems: Regional Container Line (RCL)
- Regional Container Line is the largest container shipping company in Thailand. It has attractive valuations, strong balance sheet, and has a major tailwind of higher global shipping freight rates.
- RCL’s dividend yield averaged 9.6% from 2019 to 2022. The biggest factor driving higher shipping freight rates in 2024 has been the Suez crisis resulting from Houthi drone attacks.
- We used Smartkarma’s Smart Score Screener system to find Regional Container Line (RCL TB).
Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations
- Cathay Pacific’s strong end to 2023 has been well flagged but we think expectations are too low for 2024.
- ANA, JAL and Korean Air have each seen unit pax revenue momentum accelerate into calendar 4Q23 which bodes well for 2024 prospects, particularly as manpower challenges slow capacity restoration.
- Our 2024 EBITDAR is 5% ahead of consensus while we are 11% ahead at the net income level.
Copa Holdings – A Slow-Growth Year in 2024 – Impressive Gain on Pre-Pandemic Economics Sustainable?
- Copa’s 2023 EBITDAR of $1,117m was achieved while growing unit revenues, while capacity expanded 13% with a 17% unit fuel cost tailwind. Not an easy feat.
- In 2024, we expect only 5% EBITDAR growth on 10% capacity growth as unit revenues decline (following the emergence of this theme in 2H23) and EBITDAR-level unit costs grow.
- We model Copa’s EBITDAR/ASM premium to 2019 down to a still-impressive 35% in 2024 but new route selection and efficiency will need to be strong to sustain these economics.
Japan Elevator Service Holdings (6544) – Business Model Generating Value and Proving Resilient
- Solid execution, high earnings visibility – Q1-3 FY3/2024 results demonstrated a continuation of positive developments in 1) sustained growth in maintenance and repair services, and 2) stronger than expected demand for modernization services.
- We believe JES is providing in-demand high-quality services driven by secular growth as building owners convert to reputable independent providers for cost management, and structural demand driving modernization of aging elevators.
- The company is on track to increase service capacity with the new JES Innovation Center Kansai (JIK) due to commence operations in April 2024.
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