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

<ul>
<li>Adjusting for impact of LNY timing, January numbers still seem firm</li>
<li>Headline February / LNY 2024 traffic growth also appears solid</li>
<li>Our thesis remains that tourism recovery takes longer, strongest in H124</li>
</ul>


Adjusting for impact of LNY timing, January numbers still seem firm
Headline February / LNY 2024 traffic growth also appears solid
Our thesis remains that tourism recovery takes longer, strongest in H124


Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth

Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Cathay Pacific Airways / Equity Bottom-Up

<ul>
<li>We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.</li>
<li>We see Cathay's consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&amp;A.</li>
<li>Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.</li>
</ul>


We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
We see Cathay's consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&amp;A.
Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.


Cathay Pacific - Reported Air China Interest Prompts Assessment of Structural Disadvantages

<ul>
<li>Trip.com reported a strong set of Q4 and FY23 earnings results last week</li>
<li>Company has held the line on SG&amp;A expenses; look for strong H124 growth</li>
<li>We believe shares are cheap and recommend investors buy below US$43/ADS</li>
</ul>


Trip.com reported a strong set of Q4 and FY23 earnings results last week
Company has held the line on SG&amp;A expenses; look for strong H124 growth
We believe shares are cheap and recommend investors buy below US$43/ADS


Trip.com Q4 Quick Take: Strong Top-Line Growth | Impressive Expense Control | And Not Expensive

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>There is room for FY23 result of <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific Airways (293 HK)</a> to beat market expectations on stronger traffic volume and better yield performance.  </li>
<li>Resumption of more capacity, from 70% of the pre-pandemic level at end-FY23, will drive FY24 earnings with ROE at 12-13%, putting it on an inexpensive 0.65x P/B. </li>
<li>Its associate <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> will also benefit from the release of pent-up demand in the domestic market and the recovery in international travel. </li>
</ul>


There is room for FY23 result of Cathay Pacific Airways (293 HK) to beat market expectations on stronger traffic volume and better yield performance.  
Resumption of more capacity, from 70% of the pre-pandemic level at end-FY23, will drive FY24 earnings with ROE at 12-13%, putting it on an inexpensive 0.65x P/B. 
Its associate Air China Ltd (H) (753 HK) will also benefit from the release of pent-up demand in the domestic market and the recovery in international travel. 


Cathay Pacific (293 HK): Taking off with Momentum

<ul>
<li>Cathay Pacific's strong end to 2023 has been well flagged but we think expectations are too low for 2024.</li>
<li>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.</li>
<li>Our 2024 EBITDAR is 5% ahead of consensus while we are 11% ahead at the net income level.</li>
</ul>


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.


Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Hong Kong

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

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Cathay Pacific Airways (293 HK)

Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth

In January 2024 Chinese travel demand continued to recover, and initial indications are that demand related to the long LNY holiday was also strong.

Tracking Traffic

Cathay Pacific - Reported Air China Interest Prompts Assessment of Structural Disadvantages

Deep dive on the root causes of historical CX margin challenges by comparing pre-pandemic margin generation to 10 global airline peers

Neil Glynn

Trip.com Q4 Quick Take: Strong Top-Line Growth | Impressive Expense Control | And Not Expensive

Trip.com reported another strong set of quarterly results last week that featured strong top-line growth and admirable expense control. We suggest...

Tracking Traffic

Cathay Pacific (293 HK): Taking off with Momentum

CX is poised to exceed market expectations with solid traffic and improved yield, leading to further growth in FY24. Air China is also expected to...

Osbert Tang, CFA

Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Detailed analysis of Cathay Pacific's 2024 earnings prospects including pax unit revenue momentum and cost control that mirrors its North Asian peers

Neil Glynn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth

In January 2024 Chinese travel demand continued to recover, and initial indications are that demand related to the long LNY holiday was also strong.

Tracking Traffic

Cathay Pacific - Reported Air China Interest Prompts Assessment of Structural Disadvantages

Deep dive on the root causes of historical CX margin challenges by comparing pre-pandemic margin generation to 10 global airline peers

Neil Glynn

Trip.com Q4 Quick Take: Strong Top-Line Growth | Impressive Expense Control | And Not Expensive

Trip.com reported another strong set of quarterly results last week that featured strong top-line growth and admirable expense control. We suggest...

Tracking Traffic

Cathay Pacific (293 HK): Taking off with Momentum

​CX is poised to exceed market expectations with solid traffic and improved yield, leading to further growth in FY24. Air China is also expected to...

Osbert Tang, CFA

Cathay Pacific – Strong Pax Momentum Suggests 2024 Can Outperform Expectations

Detailed analysis of Cathay Pacific's 2024 earnings prospects including pax unit revenue momentum and cost control that mirrors its North Asian peers

Neil Glynn

CX is poised to exceed market expectations with solid traffic and improved yield, leading to further growth in FY24. Air China is also expected to...