Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

Hainan Meilan International Airport / Equity Bottom-Up

<ul>
<li>A slew of bad news from weak China consumption, depreciating RMB to negative progress in an arbitration sent Meilan Airport stock down to below book value.</li>
<li>Yet when it comes to the fundamental of the company itself, we believe concerns are over-blown and very much priced in.</li>
<li>Meilan Airport is the most under-valued major airport in China airport space in our view. Patience will pay off.</li>
</ul>


A slew of bad news from weak China consumption, depreciating RMB to negative progress in an arbitration sent Meilan Airport stock down to below book value.
Yet when it comes to the fundamental of the company itself, we believe concerns are over-blown and very much priced in.
Meilan Airport is the most under-valued major airport in China airport space in our view. Patience will pay off.


Meilan Airport (357 HK): Positive on The Only China Airport Trading Below Book Value

<ul>
<li>Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.</li>
<li>While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.</li>
<li>We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.</li>
</ul>


Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.
While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.
We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.


Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme

<ul>
<li>1H23 results missed our expectation because stronger-than-expected revenue was outweighed by surge in operating costs as company took from its parent the overall operation of Phase I and II.</li>
<li>We expect slow recovery in duty-free sales and elevated cost base will continue pressuring its bottom line in 2H23 and see possibility to return to profitability by 1H24.</li>
<li>While recent share price correction has priced in the weak outlook somehow, we can’t rule out further volatility post results. We are now neutral on the stock.</li>
</ul>


1H23 results missed our expectation because stronger-than-expected revenue was outweighed by surge in operating costs as company took from its parent the overall operation of Phase I and II.
We expect slow recovery in duty-free sales and elevated cost base will continue pressuring its bottom line in 2H23 and see possibility to return to profitability by 1H24.
While recent share price correction has priced in the weak outlook somehow, we can’t rule out further volatility post results. We are now neutral on the stock.


Meilan Airport (357 HK): Not Out of the Woods Yet

<ul>
<li>We had a chance talking to the company about key topics about outlook of passenger traffic, recovery of duty-free sales and details about the arbitration.</li>
<li>The takeaway is mixed as we see both positives and negatives relative to our expectations.</li>
<li>We cut our forecast of 2023 net profit from RMB400 million to RMB300 million and expect the earnings to be back-end loaded.</li>
</ul>


We had a chance talking to the company about key topics about outlook of passenger traffic, recovery of duty-free sales and details about the arbitration.
The takeaway is mixed as we see both positives and negatives relative to our expectations.
We cut our forecast of 2023 net profit from RMB400 million to RMB300 million and expect the earnings to be back-end loaded.


Meilan Airport (357 HK): Mixed Takeaways from Conversations with the Company

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Hainan Meilan International Airport / Event-Driven

<ul>
<li>Back On 29 September 2019, <a href="https://www.smartkarma.com/entities/hainan-meilan-international-airport-company-limited" target="_blank" data-smartkarma-citation="entities:12545:1" rel="noopener"><strong>Hainan Meilan International Airport (357 HK)</strong></a> entered into a subscription agreement with Hopu-affiliate Aero Infrastructure, for 200mn new H shares at HK$4.69/share.</li>
<li>That issuance failed as CSRC approval was not secured by the Long Stop. Hopu reckoned HMIA reneged on its duties to secure approval and lodged a notice of arbitration.</li>
<li>HKIAC recently agreed and opines HMIA did not use its best endeavours to complete the subscription. Hopu is seeking up to HK$6.962bn in compensation. Quite the overhang.</li>
</ul>


Back On 29 September 2019, Hainan Meilan International Airport (357 HK) entered into a subscription agreement with Hopu-affiliate Aero Infrastructure, for 200mn new H shares at HK$4.69/share.
That issuance failed as CSRC approval was not secured by the Long Stop. Hopu reckoned HMIA reneged on its duties to secure approval and lodged a notice of arbitration.
HKIAC recently agreed and opines HMIA did not use its best endeavours to complete the subscription. Hopu is seeking up to HK$6.962bn in compensation. Quite the overhang.


Hainan Meilan's (357 HK)'s Arbitration Case Is Not Without Merit

China

Hainan Meilan International Airport Company Limited provides airfield services, terminal facilities, ground handling services, passenger and cargo handling services. The Company also leases commercial and retail space at the Meilan Airport, operates airport-related business franchising, advertising, car parking, tourism services, and sells duty-free and consumable goods.

Hainan Meilan International Airport (357 HK)

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Hainan Meilan International Airport (357 HK)

Meilan Airport (357 HK): Positive on The Only China Airport Trading Below Book Value

50% market cap wiped off left Meilan Airport as the only China airport trading below book value. We believe the airport's fundamentals are not as...

Eric Chen

Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme

As a strategic asset, Meilan airport is an indispensable yet underappreciated play on Hainan DFS investment theme. We see 100% upside in return as...

Eric Chen

Meilan Airport (357 HK): Not Out of the Woods Yet

1H23 results suggests slow recovery in duty free sales and elevated cost base will continue pressuring its bottom line and profitability probably...

Eric Chen

Meilan Airport (357 HK): Mixed Takeaways from Conversations with the Company

We have mixed takeaways after talking to the company with regard to key topics such as passenger traffic, duty-free sales and progress of...

Eric Chen

Hainan Meilan's (357 HK)'s Arbitration Case Is Not Without Merit

The arbitration is an overhang. HMIA should aim to reach a settlement with Hopu. The announced upward adjustment in its slot capacity is positive. ...

David Blennerhassett

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