Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-airlines-ltd" target="_blank" data-smartkarma-citation="entities:4591:1" rel="noopener">China Airlines (2610 TT)</a> will deliver record profit in 2023 on strong passenger and rising cargo rates</li>
<li>Beyond 2023, hard to forecast due to high exposure (~30%) to volatile cargo, and it lacks brand recognition and customer loyalty evidenced by its weaker yields to local rival   </li>
<li>Target price of TWD23 based on 1.71x FY2024 P/BV ratio - one SD above mean. Limited 6% UPSIDE, with 3,9% dividend yield. Prefer <a href="https://www.smartkarma.com/entities/eva-airways-corp" target="_blank" data-smartkarma-citation="entities:20645:1" rel="noopener">Eva Airways (2618 TT)</a> </li>
</ul>



China Airlines (2610 TT) will deliver record profit in 2023 on strong passenger and rising cargo rates
Beyond 2023, hard to forecast due to high exposure (~30%) to volatile cargo, and it lacks brand recognition and customer loyalty evidenced by its weaker yields to local rival   
Target price of TWD23 based on 1.71x FY2024 P/BV ratio - one SD above mean. Limited 6% UPSIDE, with 3,9% dividend yield. Prefer Eva Airways (2618 TT) 


China Airlines (2610 TT, NEUTRAL, TP:TWD 23.00): Superb 2023 Masks Upcoming Challenges

Thematic (Sector/Industry)

<ul>
<li>In aggregate, traffic among the Big-3 Chinese airlines was up 67% YoY in February and +18% vs 2019. Incontestable proof that China has regained its air travel mojo. </li>
<li>Published March schedules show total implied capacity is 31% higher YoY and 9% higher than 2019 levels. This is driven by domestic travel, international remains depressed. </li>
<li>Driven by domestic travel, international remains depressed. POSITIVE for China Eastern and other North Asian carriers that provide the missing North America link. </li>
</ul>


In aggregate, traffic among the Big-3 Chinese airlines was up 67% YoY in February and +18% vs 2019. Incontestable proof that China has regained its air travel mojo. 
Published March schedules show total implied capacity is 31% higher YoY and 9% higher than 2019 levels. This is driven by domestic travel, international remains depressed. 
Driven by domestic travel, international remains depressed. POSITIVE for China Eastern and other North Asian carriers that provide the missing North America link. 


China BIG-3 Mainland Airlines Traffic 18% Higher than 2019!

<ul>
<li>Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   </li>
<li>All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend </li>
<li>Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  </li>
</ul>


Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   
All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend 
Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  


Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

Founder of Antler Capital

Stanley Tsai, CFA

BOC Aviation | BOCAVI <a href="https://www.smartkarma.com/entities/boc-aviation" target="_blank" data-smartkarma-citation="entities:22689:1" rel="noopener">(2588 HK)</a> 
As a follow-up on <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a>'s Smartkarma Original <a href="https://www.smartkarma.com/insights/asia-pac-airports-ups-but-mostly-downs" target="_blank" data-smartkarma-citation="insights:51855" rel="noopener">Asia-Pac Airports: Ups, But Mostly Downs</a>, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation | BOCAVI (2588 HK) 
As a follow-up on David Blennerhassett's Smartkarma Original Asia-Pac Airports: Ups, But Mostly Downs, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the changes in short interest of TWSE Stocks as of Dec 29th which has an aggregated short interest worth USD14.1bn.</li>
<li>We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.</li>
<li>We highlight short interest changes in Acer, China Airlines, Chung-Hsin, Quanta Computer, Yang Ming Marine, Wiwynn, Realtek Semi, Umc.</li>
</ul>


We analyzed the changes in short interest of TWSE Stocks as of Dec 29th which has an aggregated short interest worth USD14.1bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.
We highlight short interest changes in Acer, China Airlines, Chung-Hsin, Quanta Computer, Yang Ming Marine, Wiwynn, Realtek Semi, Umc.


TWSE Short Interest Weekly (Dec 29th): Short Covering Towards Year End

Taiwan

China Airlines Limited provides scheduled international air transportation for passengers and cargo freight throughout cities in Europe, America, Asia, and Australia.

China Airlines (2610 TT)