Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

<ul>
<li>CDF’s 1H23 preliminary results suggest that business recovery remains on track. Voices of bottom-fishing are getting louder as free fall in its share price already erased 50% market cap YTD.</li>
<li>We believe the dynamics have fundamentally changed compared to three years ago when CDF was the stock market darling. Investors need be aware of the anchoring effect in making decisions.</li>
<li>Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for better entry point.</li>
</ul>


CDF’s 1H23 preliminary results suggest that business recovery remains on track. Voices of bottom-fishing are getting louder as free fall in its share price already erased 50% market cap YTD.
We believe the dynamics have fundamentally changed compared to three years ago when CDF was the stock market darling. Investors need be aware of the anchoring effect in making decisions.
Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for better entry point.


China Tourism Duty Free Corp (601888. CH): Is Now Good Time for Bottom-Fishing?

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>Despite <a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.</li>
<li>Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.</li>
<li>Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.</li>
</ul>


Despite Shangri-La Asia (69 HK)'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.
Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.
Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.


Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.</li>
<li>For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.</li>
<li>Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.</li>
</ul>


Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.


Southbound Stock Connect Expansion: Potential Adds in 2023

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> expects a sharp 87.5-92.5% reduction in its losses in 1H22, driven primarily by significant revival in its Club Med business, though China is weak.</li>
<li>Outlook for 2H22 looks very encouraging as booking figures indicate good YoY volume growth and double-digit rate improvement in EMEA and Americas. </li>
<li>China also witnessed solid rebound in Jul and Aug after removal of lockdowns in 2Q22. New Club Med Joyview resorts including Changbaishan and Qiandaohu are added contributors. </li>
</ul>



Fosun Tourism (1992 HK) expects a sharp 87.5-92.5% reduction in its losses in 1H22, driven primarily by significant revival in its Club Med business, though China is weak.
Outlook for 2H22 looks very encouraging as booking figures indicate good YoY volume growth and double-digit rate improvement in EMEA and Americas. 
China also witnessed solid rebound in Jul and Aug after removal of lockdowns in 2Q22. New Club Med Joyview resorts including Changbaishan and Qiandaohu are added contributors. 


Fosun Tourism (1992 HK): Positive Profit Alert and Improving Outlook Guidances

Beijing Capital International Airport (BCIA) / Equity Bottom-Up

Beijing Capital International Airport (BCIA)

<ul>
<li>Share price of <a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital International Airport (BCIA) (694 HK)</a> underperformed that for <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a> by wide margin in this year, which we believe is not justified.</li>
<li>Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.</li>
<li>The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.</li>
</ul>


Share price of Beijing Capital International Airport (BCIA) (694 HK) underperformed that for Air China Ltd (753 HK) by wide margin in this year, which we believe is not justified.
Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.
The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.


Beijing Capital Intl Airport (694 HK): Preparing to Take Off

China

Beijing Capital International Airport Company Limited operates both aeronautical and non-aeronautical business in the Beijing airport.  The Company provides aircraft movement and passenger service facilities, safety and security services, fire-fighting services, and ground handling services.  In addition, Beijing Capital operates duty free and other retail shops and leases properties.

Beijing Capital International Airport (BCIA) (694 HK)

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Beijing Capital International Airport (BCIA) (694 HK)

China Tourism Duty Free Corp (601888. CH): Is Now Good Time for Bottom-Fishing?

Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for...

Eric Chen

Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Shangri-la Asia is an excellent play on recovery of China, where 55% of rooms are located. Its overseas assets will gain from surge in outbound...

Osbert Tang, CFA

Southbound Stock Connect Expansion: Potential Adds in 2023

Expansion to Southbound Stock Connect will include foreign stocks and eligibility will be aligned for Shanghai & Shenzhen. Preparation will take...

Brian Freitas

Fosun Tourism (1992 HK): Positive Profit Alert and Improving Outlook Guidances

Not only that Fosun Tourism has an improving 1H22 performance, its outlook for 2H22 is also promising as evidenced by solid forward booking, better...

Osbert Tang, CFA

Beijing Capital Intl Airport (694 HK): Preparing to Take Off

BCIA's underperformance against Air China in this year provides room for it to catch up, especially given the recovery of domestic traffic, revival...

Osbert Tang, CFA

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