HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.</li>
<li>While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.</li>
<li>We like OTAs including <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a> and <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> despite their YTD surge in share prices. Meanwhile, <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> stays as the top pick.</li>
</ul>


Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.
While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.
We like OTAs including Tongcheng Travel (780 HK) and Trip.com (9961 HK) despite their YTD surge in share prices. Meanwhile, Air China Ltd (H) (753 HK) stays as the top pick.


China Tourism and Hospitality Industry: Roundup of a Solid CNY

Equity Long-Short

Mo Aziz

<ul>
<li>Chinese airports have turnaround with Xiamen, Guangzhou, and Shanghai airports reported 9M23 profits. The others (Beijing, Shenzhen, Hainan) are still lossmaking, but should turnaround soon   </li>
<li>The upcoming Winter/Spring schedule reveals international capacity at 70% of 2019's level, a catalyst for strong earnings growth, as international flights generate &gt;2.5x higher revenues   </li>
<li>
<a href="https://www.smartkarma.com/entities/xiamen-international-air-a" target="_blank" data-smartkarma-citation="entities:18544:1" rel="noopener">Xiamen International Air A (600897 CH)</a> exhibits the best value; <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a> is the most appealing due to its size and liquidity </li>
</ul>


Chinese airports have turnaround with Xiamen, Guangzhou, and Shanghai airports reported 9M23 profits. The others (Beijing, Shenzhen, Hainan) are still lossmaking, but should turnaround soon   
The upcoming Winter/Spring schedule reveals international capacity at 70% of 2019's level, a catalyst for strong earnings growth, as international flights generate &gt;2.5x higher revenues   

Xiamen International Air A (600897 CH) exhibits the best value; Shanghai International Airport (600009 CH) is the most appealing due to its size and liquidity 


Chinese Airports at Inflection Point, Low Risk and High Visibility Growth Sector

Equity Bottom-Up

Hainan Meilan International Airport / Equity Bottom-Up

Hainan Meilan International Airport (357 HK)

<ul>
<li>The general offer for <a href="https://www.smartkarma.com/entities/hainan-meilan-international-airport-company-limited" target="_blank" data-smartkarma-citation="entities:12545:1" rel="noopener">Hainan Meilan International Airport (357 HK)</a> at HK$10.62 is not attractive, and there should be more upside than that.</li>
<li>With its ROE expected to recover to 6% in FY26-27, the implied P/B of 1.1x is too depressed. It is unable to fairly reflect the turnaround in profitability.</li>
<li>Relative to <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>'s 65.4x FY26 and 28x FY26 PER, the PERs of 22.1x and 14.2x of the offer are also too low. </li>
</ul>


The general offer for Hainan Meilan International Airport (357 HK) at HK$10.62 is not attractive, and there should be more upside than that.
With its ROE expected to recover to 6% in FY26-27, the implied P/B of 1.1x is too depressed. It is unable to fairly reflect the turnaround in profitability.
Relative to Beijing Capital International Airport (BCIA) (694 HK)'s 65.4x FY26 and 28x FY26 PER, the PERs of 22.1x and 14.2x of the offer are also too low. 


Hainan Meilan Intl Airport (357 HK): No to the General Offer

Greater China Equity Long/Short Analyst

Eric Chen

Beijing Capital International Airport / Equity Bottom-Up

Beijing Capital International Airport (694 HK)

<ul>
<li>The worst is behind Beijing Capital International Airport. We believe it is on track to achieve breakeven on quarterly basis in 2H24.</li>
<li>We see recent parking fee hikes at Daxing Airport as a signal that more will come, which is not in the price and can bring in extra option value.</li>
<li>Boom-And-Bust in China property sector is behind the airport’s share price cycle. The airport is at the cusp of a steady recovery driving mean reversion of valuation .</li>
</ul>


The worst is behind Beijing Capital International Airport. We believe it is on track to achieve breakeven on quarterly basis in 2H24.
We see recent parking fee hikes at Daxing Airport as a signal that more will come, which is not in the price and can bring in extra option value.
Boom-And-Bust in China property sector is behind the airport’s share price cycle. The airport is at the cusp of a steady recovery driving mean reversion of valuation .


Beijing Capital International Airport: On Track to Break Even

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<ul>
<li>China's outbound tourism recovery started much later than others in the region</li>
<li>In particular, Taiwan &amp; Korea began ramping outbound travel earlier (in Q222)</li>
<li>As destinations, Thailand &amp; Vietnam recovered early, but now lag HK's growth</li>
</ul>


China's outbound tourism recovery started much later than others in the region
In particular, Taiwan &amp; Korea began ramping outbound travel earlier (in Q222)
As destinations, Thailand &amp; Vietnam recovered early, but now lag HK's growth


China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

China

Beijing Capital International Airport Company Limited is primarily engaged in the operation and management of Beijing Capital International Airport, offering both aeronautical and non-aeronautical services. Its aeronautical services include aircraft movements, passenger facilities, ground support, and fire-fighting, while non-aeronautical services encompass retail, advertising, and property leasing. The company was incorporated on October 15, 1999, and is headquartered in Beijing, China.

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Beijing Capital International Airport (694 HK)

China Tourism and Hospitality Industry: Roundup of a Solid CNY

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Chinese Airports at Inflection Point, Low Risk and High Visibility Growth Sector

Chinese airports have underperformed the CSI 300 despite a successful turnaround. There will be a surge in lucrative international flights that...

Mo Aziz

Hainan Meilan Intl Airport (357 HK): No to the General Offer

The offer for Hainan Meilan at HK$10.62 is deemed unattractive, with potential for more upside given its expected recovery in ROE, low historical...

Osbert Tang, CFA

Beijing Capital International Airport: On Track to Break Even

Beijing Capital International Airport is poised for a steady recovery, with potential for breakeven by 2H24 and paving the way for mean reversion...

Eric Chen

China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

In this insight we compare China's progress toward restoring outbound tourism activity to the progress shown by other major tourist sources in the...

Tracking Traffic

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Tourism and Hospitality Industry: Roundup of a Solid CNY

​China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Chinese Airports at Inflection Point, Low Risk and High Visibility Growth Sector

​Chinese airports have underperformed the CSI 300 despite a successful turnaround. There will be a surge in lucrative international flights that...

Mo Aziz

Hainan Meilan Intl Airport (357 HK): No to the General Offer

​The offer for Hainan Meilan at HK$10.62 is deemed unattractive, with potential for more upside given its expected recovery in ROE, low historical...

Osbert Tang, CFA

Beijing Capital International Airport: On Track to Break Even

​Beijing Capital International Airport is poised for a steady recovery, with potential for breakeven by 2H24 and paving the way for mean reversion...

Eric Chen

China's Tourism Recovery Versus Other Major Tourist Sources in Asia: Delayed, Not Slower

In this insight we compare China's progress toward restoring outbound tourism activity to the progress shown by other major tourist sources in the...

Tracking Traffic

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Chinese airports have underperformed the CSI 300 despite a successful turnaround. There will be a surge in lucrative international flights that...

The offer for Hainan Meilan at HK$10.62 is deemed unattractive, with potential for more upside given its expected recovery in ROE, low historical...

Beijing Capital International Airport is poised for a steady recovery, with potential for breakeven by 2H24 and paving the way for mean reversion...