Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Travelsky Technology Ltd H / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/travelsky-technology-ltd-h" target="_blank" data-smartkarma-citation="entities:19829:1" rel="noopener">Travelsky Technology Ltd H (696 HK)</a> remains the de-facto SaaS play in the Chinese domestic airlines' industry that is proven by the higher ROE and lower debt level compared to the airlines in general. Volumes have recovered post the worse COVID-19 period thanks to the decisive government policy and as of October 2020, the YoY variance has narrowed to -1.3% compared to -46.7% in May 2020, further reinforcing the investment thesis that domestic travel that makes up to 85% of the group's business is recovering on the right direction. 
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Investors should treat <a href="https://www.smartkarma.com/entities/travelsky-technology-ltd-h" target="_blank" data-smartkarma-citation="entities:19829:1" rel="noopener">Travelsky Technology Ltd H (696 HK)</a> as an ETF to get exposure to the air travel recovery in China without the hassle of picking which airlines to buy.
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Travelsky Technology Ltd H (696 HK) remains the de-facto SaaS play in the Chinese domestic airlines' industry that is proven by the higher ROE and lower debt level compared to the airlines in general. Volumes have recovered post the worse COVID-19 period thanks to the decisive government policy and as of October 2020, the YoY variance has narrowed to -1.3% compared to -46.7% in May 2020, further reinforcing the investment thesis that domestic travel that makes up to 85% of the group's business is recovering on the right direction. 

Investors should treat Travelsky Technology Ltd H (696 HK) as an ETF to get exposure to the air travel recovery in China without the hassle of picking which airlines to buy.


Travelsky (696): Muted Impact from New Virus

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

We see the joint announcement by five ministries/departments on the development of postal and express industry in the Guangdong-Hong Kong-Macau Greater Bay Area has positive implications on many of the logistics operators in China in the medium to long term. The supporting initiatives range from the strengthening of the strategic hubs of Guangzhou and Shenzhen airports to encouraging more industry consolidations.While many companies are expected to benefit from these GBA postal and express policies, we highlight some of the most important ones in this Insight - <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> (GBIA) and <a href="https://www.smartkarma.com/entities/shenzhen-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:15522:1" rel="noopener">Shenzhen Airport Co A (000089 CH)</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>, <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a>, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> and <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>.

We see the joint announcement by five ministries/departments on the development of postal and express industry in the Guangdong-Hong Kong-Macau Greater Bay Area has positive implications on many of the logistics operators in China in the medium to long term. The supporting initiatives range from the strengthening of the strategic hubs of Guangzhou and Shenzhen airports to encouraging more industry consolidations.While many companies are expected to benefit from these GBA postal and express policies, we highlight some of the most important ones in this Insight - Guangzhou Baiyun International Airport (600004 CH) (GBIA) and Shenzhen Airport Co A (000089 CH), China Southern Airlines (1055 HK), Sinotrans (598 HK), Kerry Logistics Network (636 HK), Shenzhen Intl (152 HK) and S.F. Holding (002352 CH).

China Logistics: Key Beneficiaries of China's Greater Bay Area Postal and Express Development

While <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> (CSA) is still showing the best traffic performance in absolute level, the Nov traffic showed that <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> has started to pick up its momentum. We believe the three important things to note are: 1.) Air China recording the least retreat in passenger traffic momentum MoM, 2.) Air China has the least drop in passenger load factor MoM, and 3.) Air China gathering cargo momentum.Since Nov, Air China has outperformed CSA by 10pp, and we see good possibility for this trend to continue into 2021, hence our <a href="https://www.smartkarma.com/insights/2021-high-conviction-pair-trade-long-air-china-753-hk-short-china-southern-1055-hk" target="_blank" data-smartkarma-citation="insights:45584" rel="noopener">2021 High Conviction: Pair Trade - Long Air China (753 HK), Short China Southern (1055 HK)</a>. Another positive note is that share price of <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific Airways (293 HK)</a> has surged by 63.6% from the rights issue price of HK$4.68, and this has added some HK$2.2bn to Air China's value on the additional holdings in CX from the rights.

While China Southern Airlines (1055 HK) (CSA) is still showing the best traffic performance in absolute level, the Nov traffic showed that Air China Ltd (H) (753 HK) has started to pick up its momentum. We believe the three important things to note are: 1.) Air China recording the least retreat in passenger traffic momentum MoM, 2.) Air China has the least drop in passenger load factor MoM, and 3.) Air China gathering cargo momentum.Since Nov, Air China has outperformed CSA by 10pp, and we see good possibility for this trend to continue into 2021, hence our 2021 High Conviction: Pair Trade - Long Air China (753 HK), Short China Southern (1055 HK). Another positive note is that share price of Cathay Pacific Airways (293 HK) has surged by 63.6% from the rights issue price of HK$4.68, and this has added some HK$2.2bn to Air China's value on the additional holdings in CX from the rights.

Air China (753 HK): Quietly Catching up Against Peers, Well Set to Outperform in 2021

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

Beijing Capital International Airport (BCIA)

<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> staged a 45% relief rally since Nov on several piece of good news and more optimistic expectations, but we see such move as excessive. Its 12-month forward P/B multiple has hence moved back to 1.03x, about the level before the pandemic. This is clearly difficult to justify given the challenges it will face in the next two years.The traffic diversion to Beijing Daxing International Airport, slow recovery of international traffic and heavy reliance of duty free on international routes will make BCIA difficult to return to its FY19 profit level in FY22, but the share price is now reflecting this scenario. We find this unrealistic and believe there is significant downside risk. It is also interesting to note that average short volume in Dec has picked up to 23%, compared with just 10% in Nov.

Beijing Capital International Airport (BCIA) (694 HK) staged a 45% relief rally since Nov on several piece of good news and more optimistic expectations, but we see such move as excessive. Its 12-month forward P/B multiple has hence moved back to 1.03x, about the level before the pandemic. This is clearly difficult to justify given the challenges it will face in the next two years.The traffic diversion to Beijing Daxing International Airport, slow recovery of international traffic and heavy reliance of duty free on international routes will make BCIA difficult to return to its FY19 profit level in FY22, but the share price is now reflecting this scenario. We find this unrealistic and believe there is significant downside risk. It is also interesting to note that average short volume in Dec has picked up to 23%, compared with just 10% in Nov.

Beijing Cap Intl Airport (694 HK): Don't Get Too Excited, The Relief Rally Is Excessive

Guangzhou Baiyun International Airport / Equity Bottom-Up

<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> (GBIA) has another solid month in Nov, continuing the promising trend in Oct and logging a massive 20.2% YoY surge in domestic aircraft movement and a 4.8% leap in domestic passenger traffic. Moreover, the decline in cargo and mail throughput has narrowed to 1.3% YoY only, the best in the last 5 months. We believe this set of traffic performance signals that there is no abatement in its growth paces.Despite the positive trend, GBIA has underperformed <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> (SIAC) by a significant 16.4pp YTD. It is true that the construction of a new Guangzhou airport and the closer co-operation between the Hong Kong airport and Zhuhai airport are challenges in the future. However, with a favourable base for YoY comparison in 1Q21 and the sustained strength in domestic traffic in the next few months, we believe there is room for GBIA to narrow its performance gap against SIAC in the near term.

Guangzhou Baiyun International Airport (600004 CH) (GBIA) has another solid month in Nov, continuing the promising trend in Oct and logging a massive 20.2% YoY surge in domestic aircraft movement and a 4.8% leap in domestic passenger traffic. Moreover, the decline in cargo and mail throughput has narrowed to 1.3% YoY only, the best in the last 5 months. We believe this set of traffic performance signals that there is no abatement in its growth paces.Despite the positive trend, GBIA has underperformed Shanghai International Airport (600009 CH) (SIAC) by a significant 16.4pp YTD. It is true that the construction of a new Guangzhou airport and the closer co-operation between the Hong Kong airport and Zhuhai airport are challenges in the future. However, with a favourable base for YoY comparison in 1Q21 and the sustained strength in domestic traffic in the next few months, we believe there is room for GBIA to narrow its performance gap against SIAC in the near term.

Guangzhou Baiyun Intl Airport (600004 CH): No Abatement in Growth Paces

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)

Travelsky (696): Muted Impact from New Virus

Travelsky Technology Ltd H (696 HK) is comparable to an ETF for investors who want to get exposure to the air travel recovery in China without...

Henry Soediarko

China Logistics: Key Beneficiaries of China's Greater Bay Area Postal and Express Development

China's support of postal and express industry development in the Greater Bay Area has positive implications on many logistics companies. We...

Osbert Tang, CFA

Air China (753 HK): Quietly Catching up Against Peers, Well Set to Outperform in 2021

Air China narrowed its gap against CSA on traffic and load performance in Nov, and this sets the stage for its outperformance in 2021. The surge in...

Osbert Tang, CFA

Beijing Cap Intl Airport (694 HK): Don't Get Too Excited, The Relief Rally Is Excessive

BCIA's 45% relief rally in less than 2 months is excessive, as P/B already returned to pre-pandemic level. Share price is expecting profit to...

Osbert Tang, CFA

Guangzhou Baiyun Intl Airport (600004 CH): No Abatement in Growth Paces

No sign of slowing traffic growth and decline for cargo throughput have further moderated in Nov. Having underperformed SIAC significantly YTD,...

Osbert Tang, CFA

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