HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Southern Airlines / Equity Bottom-Up

<ul>
<li>While China Southern Airlines (1055 HK) saw passenger traffic up 17.3% in Jan, this is at the expense of higher capacity, leading to a 1.8pp YoY passenger load contraction. </li>
<li>Its cargo traffic underperformed both CEA and Air China with a YoY decline; and this is disappointing in a period of time where airfreight rate is at record-breaking level.  </li>
<li>We see reduced local travel demand, higher operating costs, weaker cargo business, pressure on yield and higher base of comparison key challenges in 2022, and prefer Air China Ltd (753 HK). </li>
</ul>


While China Southern Airlines (1055 HK) saw passenger traffic up 17.3% in Jan, this is at the expense of higher capacity, leading to a 1.8pp YoY passenger load contraction. 
Its cargo traffic underperformed both CEA and Air China with a YoY decline; and this is disappointing in a period of time where airfreight rate is at record-breaking level.  
We see reduced local travel demand, higher operating costs, weaker cargo business, pressure on yield and higher base of comparison key challenges in 2022, and prefer Air China Ltd (753 HK). 


China Southern Airlines (1055 HK): A Tough Start

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 analyse the changes of A/H premium on 136 stocks over the last week.</li>
<li>Information technology and health care led the increases of A/H premium while consumer staple led the decreases of A/H premium. </li>
<li>We highlight A/H premium increases for Flat Glass, Cansino, and China Eastern Air. </li>
</ul>


We analyse the changes of A/H premium on 136 stocks over the last week.
Information technology and health care led the increases of A/H premium while consumer staple led the decreases of A/H premium. 
We highlight A/H premium increases for Flat Glass, Cansino, and China Eastern Air. 


A/H Premium Weekly: Flat Glass, Cansino, China Eastern Air

Thematic (Sector/Industry)

<ul>
<li>
<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>, <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> and <a href="https://www.smartkarma.com/entities/china-eastern-airlines-co-h" target="_blank" data-smartkarma-citation="entities:1079:1" rel="noopener">China Eastern Airlines (670 HK) </a>issued profit warnings for FY21, guiding for Rmb36.8-43.3bn aggregate losses, worse than FY20. </li>
<li>On QoQ basis, CSA's bottom line is significantly weaker as losses enlarged 3.1x in 4Q21, versus 38.4% for CEA and 54% for Air China, based on the mid-point of guidances.</li>
<li>We expect Air China to outperform CSA (YTD: 1.6pp), backed by more international traffic, border opening of China, favourable cargo demand and pricing, and improvement at <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a>. </li>
</ul>



Air China Ltd (753 HK), China Southern Airlines (1055 HK) and China Eastern Airlines (670 HK) issued profit warnings for FY21, guiding for Rmb36.8-43.3bn aggregate losses, worse than FY20. 
On QoQ basis, CSA's bottom line is significantly weaker as losses enlarged 3.1x in 4Q21, versus 38.4% for CEA and 54% for Air China, based on the mid-point of guidances.
We expect Air China to outperform CSA (YTD: 1.6pp), backed by more international traffic, border opening of China, favourable cargo demand and pricing, and improvement at Cathay Pacific (293 HK). 


Chinese Airlines: A Tale of Three Loss-Making, but Outperforming, Companies

<ul>
<li>We analyse the changes of A/H premium on 135 stocks over the last week.</li>
<li>We highlight three sectors that contributed to the A/H premium decline: consumer staple, consumer discretionary, and information technology.</li>
<li>We highlight A/H premium increase of China Communication Construction (1800 HK), and China Eastern Air (670 HK). </li>
</ul>


We analyse the changes of A/H premium on 135 stocks over the last week.
We highlight three sectors that contributed to the A/H premium decline: consumer staple, consumer discretionary, and information technology.
We highlight A/H premium increase of China Communication Construction (1800 HK), and China Eastern Air (670 HK). 


A/H Premium Weekly: China Comm Construction, China Eastern Air

<ul>
<li>We analyse the changes of A/H premium on 135 stocks over the last week. </li>
<li>Top three sectors in terms of A/H premium increase were consumer stable, utilities and industrials.</li>
<li>Six industrial names appeared in the top 10 stocks with week-on-week A/H increases. </li>
</ul>


We analyse the changes of A/H premium on 135 stocks over the last week. 
Top three sectors in terms of A/H premium increase were consumer stable, utilities and industrials.
Six industrial names appeared in the top 10 stocks with week-on-week A/H increases. 


A/H Premium Weekly: Industrials Led Premium Increase

China

China Eastern Airlines Corporation Limited operates airline businesses. The Company provides passenger transport, air freight, air catering, and other related services. China Eastern Airlines conducts businesses worldwide.

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China Eastern Airlines Lt (600115 CH)

China Southern Airlines (1055 HK): A Tough Start

CSA has a tough start for 2022 as reflected in weak Jan load and cargo performance. We see many challenges brewing in this year and expect the...

Osbert Tang, CFA

A/H Premium Weekly: Flat Glass, Cansino, China Eastern Air

We highlight information technology and health care led the increases of A/H premium and three stocks: Flat Glass, Cansino, and China Eastern Air.

Ke Yan, CFA, FRM

Chinese Airlines: A Tale of Three Loss-Making, but Outperforming, Companies

Chinese airlines have issued profit warnings for FY21 with record losses in the year, and CSA looks to have the weakest QoQ performance in 4Q21. We...

Osbert Tang, CFA

A/H Premium Weekly: China Comm Construction, China Eastern Air

We highlight three sectors that contributed to the WOW A/H premium decline: consumer staple, consumer discretionary, and information technology,...

Ke Yan, CFA, FRM

A/H Premium Weekly: Industrials Led Premium Increase

Top three sectors in terms of A/H premium increase were consumer stable, utilities and industrials. Six industrial names appeared in the top 10 A/H...

Ke Yan, CFA, FRM

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