Founder of Antler Capital

Stanley Tsai, CFA

Equity Bottom-Up

BOC Aviation | BOCAVI <a href="https://www.smartkarma.com/entities/boc-aviation" target="_blank" data-smartkarma-citation="entities:22689:1" rel="noopener">(2588 HK)</a> 
As a follow-up on <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a>'s Smartkarma Original <a href="https://www.smartkarma.com/insights/asia-pac-airports-ups-but-mostly-downs" target="_blank" data-smartkarma-citation="insights:51855" rel="noopener">Asia-Pac Airports: Ups, But Mostly Downs</a>, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation | BOCAVI (2588 HK) 
As a follow-up on David Blennerhassett's Smartkarma Original Asia-Pac Airports: Ups, But Mostly Downs, we take a look at BOCAVI, which, in our view, is a compelling alternative to APAC airport operators and airlines as a post-Covid trade.
BOCAVI is a highly geared play on the resumption of air travel. The stock has gone through periods of significant out/underperformance against the APAC airports and airlines and may continue to give investors high beta in either direction. The geographical exposure is broad, but there is a heavy skew towards short-haul flights, which will see the earliest acceleration in passenger traffic.
Management's countercyclical capex expansion increasingly looks like a shrewd bet. At its core, BOCAVI is in the capital management business. Strong liquidity and BOC's explicit backing have allowed the lessor to grow its purchase-and-leaseback portfolio through the depths of the pandemic. While airlines are still hemorrhaging cash, over 99% of BOCAVI's aircraft remain cash-generating.  
We expect the firm's undiscounted committed revenues to top USD20bn in 2021. By year-end, the value of the portfolio will have doubled since 2014. We estimate the present value of this cashflow stream to be HKD72.80/share. We are essentially getting free growth optionality. 
We are buyers at book value. The stock is trading at 8x P/E and 1.1x P/B on a 12M forward basis. BOCAVI is reasonably liquid, with a market cap of USD6bn and average daily turnover of USD3.5mn. Besides the obvious risk of protracted lockdowns globally, a well-functioning USD bond market and BOC's funding support are critical to our investment case.
Attachment: BOCAVI Financial Summary

BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

HD Hyundai Marine Solution  / Event-Driven

<ul>
<li>After a 96.5% gain on listing day, <a href="https://www.smartkarma.com/entities/hd-hyundai-marine-solution-co" target="_blank" data-smartkarma-citation="entities:41002:1" rel="noopener">HD Hyundai Marine Solution (443060 KS)</a> is very close to levels needed for <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX)</a> inclusion in June.</li>
<li>
<a href="https://www.smartkarma.com/entities/hd-hyundai-marine-solution-co" target="_blank" data-smartkarma-citation="entities:41002:1" rel="noopener">HD Hyundai Marine Solution</a> needs to outperform the 50th ranked stock in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> by 11.4% on average over the next 15 trading days to be added to the index.</li>
<li>Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.</li>
</ul>


After a 96.5% gain on listing day, HD Hyundai Marine Solution (443060 KS) is very close to levels needed for Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion in June.

HD Hyundai Marine Solution needs to outperform the 50th ranked stock in the KOSPI2 INDEX by 11.4% on average over the next 15 trading days to be added to the index.
Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.


HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

<ul>
<li>The European Commission has confirmed it aims to make a preliminary decision on the proposed Korean Air/Asiana merger by 14 February.</li>
<li>Plans to sell Asiana Cargo may struggle to find a buyer, while the US has also highlighted concerns regarding the merger, and Japan has yet to provide approval.</li>
<li>We continue to highlight there is a strong argument for Korean Air continuing alone, as Asiana continues to struggle to achieve profitability, with a stretched balance sheet.</li>
</ul>


The European Commission has confirmed it aims to make a preliminary decision on the proposed Korean Air/Asiana merger by 14 February.
Plans to sell Asiana Cargo may struggle to find a buyer, while the US has also highlighted concerns regarding the merger, and Japan has yet to provide approval.
We continue to highlight there is a strong argument for Korean Air continuing alone, as Asiana continues to struggle to achieve profitability, with a stretched balance sheet.


Korean Air: European Merger Review Decision Not Expected Until Mid-February

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

HDC Hyundai Development Co-Engineering & Construction / Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction

<ul>
<li>In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.</li>
<li>Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.  </li>
<li>These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang &amp; Hanjin KAL Corp vs Korean Air Lines].</li>
</ul>


In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.  
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang &amp; Hanjin KAL Corp vs Korean Air Lines].


Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

<ul>
<li>On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.</li>
<li>It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.</li>
<li>One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.</li>
</ul>


On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.
It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.
One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.


Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?

South Korea

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Korean Air Lines (003490 KS)

BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

As downstream players continue to hemorrhage cash, over 99% of BOCAVI’s aircraft are still cash-generating. Valuation is undemanding for a high...

Stanley Tsai, CFA

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

A 96.5% rally on listing day as retail and foreign investors sold and domestic instis bought. The stock is now ~11% away from KOSPI200 inclusion in...

Brian Freitas

Korean Air: European Merger Review Decision Not Expected Until Mid-February

The Korean Air - Asiana merger saga continues with Europe confirming mid-February for a preliminary decision. We continue to see the scope for the...

Neil Glynn

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in...

Douglas Kim

Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?

On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air....

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)