HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Guangzhou Baiyun International Airport / Equity Bottom-Up

There is full recovery in both domestic aircraft movement and passenger throughput at <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> in Sep, which registered YoY growth of 8.5% and 0.7%, respectively. The figures suggested further strength in the domestic market and should reflect positively on a QoQ in GBIA's profitability improvement. Also, the initial figures for the Golden Week have pointed to a 4.9% higher daily aircraft movement and 8.2% higher daily passenger throughput than the average in Sep. We believe the rebound of international passenger will be an increasingly important driver for GBIA's traffic recovery over the next 12 months. For example, <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a> has already increased its international flights departing from Guangzhou from 16 in Sep to 20 in Oct. GBIA has also obtained approval for non-public issuance of A-shares to its parent to raise fresh equity of Rmb3.2bn, and we believe these are all positive developments for the company.

There is full recovery in both domestic aircraft movement and passenger throughput at Guangzhou Baiyun International Airport (600004 CH) in Sep, which registered YoY growth of 8.5% and 0.7%, respectively. The figures suggested further strength in the domestic market and should reflect positively on a QoQ in GBIA's profitability improvement. Also, the initial figures for the Golden Week have pointed to a 4.9% higher daily aircraft movement and 8.2% higher daily passenger throughput than the average in Sep. We believe the rebound of international passenger will be an increasingly important driver for GBIA's traffic recovery over the next 12 months. For example, China Southern Airlines (1055 HK) has already increased its international flights departing from Guangzhou from 16 in Sep to 20 in Oct. GBIA has also obtained approval for non-public issuance of A-shares to its parent to raise fresh equity of Rmb3.2bn, and we believe these are all positive developments for the company.

Guangzhou Baiyun Intl Airport (600004 CH): Sep Marked the First Dual YoY Growth

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Trip.com Should Continue to Get a Significant Upward Re-Rating: Mainland China has been at the epicenter of this tourism slowdown. If the virus impact continues to be held in check for 2-3 weeks post-Golden Week, the risk to tourism and confidence should start to seriously abate; and *Travel Rebound Underway: The good news is that mainland China hasn’t “officially” reported local COVID-19 infections since August 15th, although there were two asymptomatic cases disclosed in late September. After nine plus months of hiding and the Covid-19 pandemic largely under control in mainland China, the Ministry of Culture and Tourism stated that the first four days of the Golden Week holiday beginning October 1st witnessed nearly 425 mn local trips - nearly 80% of the level posted in 2019.

*Trip.com Should Continue to Get a Significant Upward Re-Rating: Mainland China has been at the epicenter of this tourism slowdown. If the virus impact continues to be held in check for 2-3 weeks post-Golden Week, the risk to tourism and confidence should start to seriously abate; and *Travel Rebound Underway: The good news is that mainland China hasn’t “officially” reported local COVID-19 infections since August 15th, although there were two asymptomatic cases disclosed in late September. After nine plus months of hiding and the Covid-19 pandemic largely under control in mainland China, the Ministry of Culture and Tourism stated that the first four days of the Golden Week holiday beginning October 1st witnessed nearly 425 mn local trips - nearly 80% of the level posted in 2019.

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Thematic (Sector/Industry)

<div>With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.</div>

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

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

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/827/original/BANNER-TOURISM.png?1601474994" class="editor-image img-responsive" data-smartkarma-image-id="162827"></figure>
Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now.


Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now. 

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

China

Air China Limited provides passenger, cargo, and airline-related services in China.  The Company is primarily based in Beijing and a major hub for domestic and international air transportation.  Air China's airline-related services include aircraft maintenance, repair, overhaul service, ground services, and in-flight catering services.

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Air China Ltd (H) (753 HK)

Guangzhou Baiyun Intl Airport (600004 CH): Sep Marked the First Dual YoY Growth

Sep marked the first month of positive growth in both domestic aircraft movement and passenger throughput at Guangzhou Baiyun Intl Airport; and we...

Osbert Tang, CFA

Trip.com – All Systems Go

Trip.com - All Systems Go: Travel during Golden Week, and C-Trip looks to be biggest beneficiary as largest online travel agency.

Thomas J. Monaco

China Macro and Geopolitical Briefing

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and...

JL Warren Capital

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

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

BANNER

Tracking Traffic

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