Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Thematic (Sector/Industry)

<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?

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.</li>
<li>A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.</li>
<li>This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. </li>
</ul>


The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.
A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.
This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. 


Chinese Airlines: Well Placed for a Reversal

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The <em>Somewhat</em>-Brand-Spanking New (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.</li>
<li>We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.</li>
<li>The last 10wks (since the start of the new Tracker and Portfolio 11 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%, -68%.</li>
</ul>


The Somewhat-Brand-Spanking New (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
The last 10wks (since the start of the new Tracker and Portfolio 11 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%, -68%.


Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

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.

Equity Capital Markets

Skymark Airlines / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/skymark-airlines-inc" target="_blank" data-smartkarma-citation="entities:20430:1" rel="noopener">Skymark Airlines (9204 JP)</a> raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th Jun 2023.</li>
<li>Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.</li>
<li>In this note, we will talk about the lock-up dynamics and updates since our last note.</li>
</ul>



Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th Jun 2023.
Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.
In this note, we will talk about the lock-up dynamics and updates since our last note.


Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Equity Bottom-Up

Cathay Pacific Airways / Equity Bottom-Up

<ul>
<li>The recent discrimination incident will likely affect traffic recovery pace 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> negatively if it turns into a full-scale boycott by mainland passengers.</li>
<li>The scenario of CX becoming majority-owned by <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> is getting increasingly possible. This may not be totally positive to CX given CA's weaker service ranking.</li>
<li>Consensus forecasts now look somewhat bullish following the incident, and the stock's 0.7x P/B does not stand out as attractive relative to history or ROE (7% in FY25F).</li>
</ul>


The recent discrimination incident will likely affect traffic recovery pace of Cathay Pacific Airways (293 HK) negatively if it turns into a full-scale boycott by mainland passengers.
The scenario of CX becoming majority-owned by Air China Ltd (H) (753 HK) is getting increasingly possible. This may not be totally positive to CX given CA's weaker service ranking.
Consensus forecasts now look somewhat bullish following the incident, and the stock's 0.7x P/B does not stand out as attractive relative to history or ROE (7% in FY25F).


China

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

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China Southern Airlines (1055 HK)

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

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mohshin Aziz

Chinese Airlines: Well Placed for a Reversal

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²

The Quiddity A/H Premium Tracker. Tables, Charts, Flows, Positions (both SB and NB). This week was AGAIN messy. Pairwise volatility is up. universe...

Travis Lundy

Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th...

Ethan Aw

Cathay Pacific (293 HK): Hard Landing

The recent iscrimination incident is likely to weigh on near-term traffic recovery while the increasingly possible scenario of CX becoming majority...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

​Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mohshin Aziz

Chinese Airlines: Well Placed for a Reversal

​Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²

The Quiddity A/H Premium Tracker. Tables, Charts, Flows, Positions (both SB and NB). This week was AGAIN messy. Pairwise volatility is up. universe...

Travis Lundy

Skymark Airlines Lockup Expiry - Still Doesn’t Seem Cheap with 50% of the Shares Being Unlocked

Skymark Airlines (9204 JP) raised US$242m in its Japan IPO. The shares began to trade on 14th Dec 2022, its six-month lockup will expire on 11th...

Ethan Aw

Cathay Pacific (293 HK): Hard Landing

The recent iscrimination incident is likely to weigh on near-term traffic recovery while the increasingly possible scenario of CX becoming majority...

Osbert Tang, CFA

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...