HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. </li>
<li>With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. </li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a>, <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a> and <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> are key beneficiaries, while <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric (3899 HK)</a> may turned into exchange losses.</li>
</ul>


Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. 
With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. 

Shenzhen International (152 HK), ENN Energy (2688 HK), Shenzhen Expressway (548 HK) and Kunlun Energy (135 HK) are key beneficiaries, while CIMC Enric (3899 HK) may turned into exchange losses.


China Strategy: It Is the Foreign Exchange Impact, Stupid!

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

<ul>
<li>On Monday evening in the US, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> reported Q422 results that beat low expectations, but shares in the US traded down about 3% in Tuesday's session</li>
<li>As for guidance, management offered few specifics but noted a sharp improvement in booking activity early in 2023, but also highlighted an outbound capacity bottleneck at the airlines</li>
<li>Just as Covid's negative impacts papered over the secular challenges facing Trip.com, the dramatic near-term recovery in travel activity also obscures longstanding threats</li>
</ul>


On Monday evening in the US, Trip.com (TCOM US) reported Q422 results that beat low expectations, but shares in the US traded down about 3% in Tuesday's session
As for guidance, management offered few specifics but noted a sharp improvement in booking activity early in 2023, but also highlighted an outbound capacity bottleneck at the airlines
Just as Covid's negative impacts papered over the secular challenges facing Trip.com, the dramatic near-term recovery in travel activity also obscures longstanding threats


Trip.com Q4/2022 Results: Back to Reality?

<ul>
<li>With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  </li>
<li>Online travel agencies and hotel and resorts operators including <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a>, <a href="https://www.smartkarma.com/entities/huazhu-group-ltd-79e0c5b5-ad55-42ed-b8d2-a2173defd0ea" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Group (1179 HK)</a>, <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> and <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> are well positioned.</li>
<li>These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. </li>
</ul>


With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  
Online travel agencies and hotel and resorts operators including Tongcheng Travel Holdings (780 HK), H World Group (1179 HK), Trip.com (9961 HK) and Fosun Tourism (1992 HK) are well positioned.
These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. 


China Tourism and Hospitality Industry: A Year of Revenge

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

<ul><li>China’s top state assets administration imposed minimum prices for tickets on seven state-owned airlines, slamming the door on ultra-low-cost promotions launched as travel plunged during the pandemic</li><li>The commission put a floor under prices to preserve and increase the value of state-owned assets and to pare operating losses, a senior industry insider said.</li><li>The move is a way for SASAC to exercise its rights as a majority shareholder of the state-owned airlines.</li></ul>

China’s top state assets administration imposed minimum prices for tickets on seven state-owned airlines, slamming the door on ultra-low-cost promotions launched as travel plunged during the pandemicThe commission put a floor under prices to preserve and increase the value of state-owned assets and to pare operating losses, a senior industry insider said.The move is a way for SASAC to exercise its rights as a majority shareholder of the state-owned airlines.

China Slams the Door on ‘1 Yuan Airfares’ Spawned by the Pandemic

<ul><li>China’s civil aviation industry plunged deeper into the red in 2022 as Covid restrictions effectively shut down international travel</li><li>However, there are hopes things may turn around quickly after the abandonment of the “zero-Covid” strategy last month</li><li>The country’s airline companies posted a combined loss of 216 billion yuan ($31.8 billion) last year, widening from 84.3 billion yuan in 2021 and 94.7 billion in 2020</li></ul>

China’s civil aviation industry plunged deeper into the red in 2022 as Covid restrictions effectively shut down international travelHowever, there are hopes things may turn around quickly after the abandonment of the “zero-Covid” strategy last monthThe country’s airline companies posted a combined loss of 216 billion yuan ($31.8 billion) last year, widening from 84.3 billion yuan in 2021 and 94.7 billion in 2020

Losses Blow Out at China’s Airlines as Passengers Dip to 12-Year Low

China

China Southern Airlines is a major airline specializing in comprehensive air transportation services, including scheduled passenger flights and the transport of cargo and mail. The airline also provides complementary services such as aircraft maintenance, catering, and ground handling. It is headquartered in Guangzhou, Guangdong, China, and was founded in 1988.

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China Southern Airlines (1055 HK)

China Strategy: It Is the Foreign Exchange Impact, Stupid!

Shenzhen Intl, ENN Energy, Shenzhen Expressway and Kunlun Energy are the key beneficiaries of the reverse in Rmb/USD depreciation trend in FY23,...

Osbert Tang, CFA

Trip.com Q4/2022 Results: Back to Reality?

As China emerges from Covid, old challenges remain for Trip.com. After posting solid Q422 results and pointing to signs of a strong recovery, these...

Daniel Hellberg

China Tourism and Hospitality Industry: A Year of Revenge

We are only in early stage of China's tourism and hospitality recovery, after its re-opening of borders in Jan. We identify Tongcheng, H World,...

Osbert Tang, CFA

China Slams the Door on ‘1 Yuan Airfares’ Spawned by the Pandemic

China’s top state assets administration imposed minimum prices for tickets on seven state-owned airlines, slamming the door on ultra-low-cost...

Caixin Global

Losses Blow Out at China’s Airlines as Passengers Dip to 12-Year Low

China’s civil aviation industry plunged deeper into the red in 2022 as Covid restrictions effectively shut down international travel

Caixin Global

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