Cathay's Latest Organizational Streamlining and Job Cuts Will Not Solve Core Issues; FVE Maintained

Cathay's Fiscal 2016 Result Showed Ongoing Fundamental Deterioration; FVE Cut to HKD 8.5 Per Share

Qatar Stake Purchase Unlikely to Have Material Impact on Cathay's Bottom Line

Cathay Pacific: The Hubris of the Last Decade and the Long Flight Down from China Windfall

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Equity Bottom-Up

Cathay Pacific Airways / Equity Bottom-Up

No-moat Cathay Pacific has retracted its second-half earnings forecast just two months after the release of its interim report. The company no longer expects better bottom-line performance in the second half, citing that “overcapacity and strong competition” are having an adverse impact on passenger ticket yield performance. After factoring in the worse-than-expected yield deterioration, we cut our 2016 net income and revenue forecasts by 79% and 2%, respectively, to HKD 518 million and HKD 9.4 billion.Longer term, the higher operating costs related to external factors (higher airport construction charges and increasing landing and parking fees) will weigh further on Cathay’s bottom line, in our view. Thus, we lower our fair value estimate to HKD 9 per share from HKD 10 per shareAnalyst: John Hu

No-moat Cathay Pacific has retracted its second-half earnings forecast just two months after the release of its interim report. The company no longer expects better bottom-line performance in the second half, citing that “overcapacity and strong competition” are having an adverse impact on passenger ticket yield performance. After factoring in the worse-than-expected yield deterioration, we cut our 2016 net income and revenue forecasts by 79% and 2%, respectively, to HKD 518 million and HKD 9.4 billion.Longer term, the higher operating costs related to external factors (higher airport construction charges and increasing landing and parking fees) will weigh further on Cathay’s bottom line, in our view. Thus, we lower our fair value estimate to HKD 9 per share from HKD 10 per shareAnalyst: John Hu

Cathay Pacific Set To Report Dismayed Second-Half 2016 Results