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

<a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/121/original/image_17443488521623225592751.png?1623225593" class="editor-image img-responsive" data-smartkarma-image-id="212121"></figure>
source: Reuters

Airports of Thailand (AOT TB) path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.

source: Reuters

Airport of Thailand (AOT): Phuket Sandbox

Founder of Antler Capital

Stanley Tsai, CFA

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 Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Sing Air, JD Logistics, China Mobile, Angang/Bengang, Link Admin, Xiaomi

<a href="https://www.smartkarma.com/entities/samsonite-international-sa" target="_blank" data-smartkarma-citation="entities:12790:1" rel="noopener">Samsonite (1910 HK)</a> 's share price has enjoyed a handsome recovery in the past year and the gutsy bottom picker traders have made around 136% since May 2020. Has the recovery trade been priced in? If not, how much upside is left? Or it is all just a euphoria? 
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A channel check with flight processing software companies reveals that the recovery in the number of air travel passengers is real. There is of course a risk that there will be delayed recovery due to the emergence of the new variant or slower-than-expected vaccination exercise in the major part of the world.
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Apart from that, <a href="https://www.smartkarma.com/entities/samsonite-international-sa" target="_blank" data-smartkarma-citation="entities:12790:1" rel="noopener">Samsonite (1910 HK)</a> looks like a buy to me especially when it has a decent amount of cash on the balance sheet.

Samsonite (1910 HK) 's share price has enjoyed a handsome recovery in the past year and the gutsy bottom picker traders have made around 136% since May 2020. Has the recovery trade been priced in? If not, how much upside is left? Or it is all just a euphoria? 

A channel check with flight processing software companies reveals that the recovery in the number of air travel passengers is real. There is of course a risk that there will be delayed recovery due to the emergence of the new variant or slower-than-expected vaccination exercise in the major part of the world.

Apart from that, Samsonite (1910 HK) looks like a buy to me especially when it has a decent amount of cash on the balance sheet. 

Samsonite (1910): Channel Checks Recovery

Travis Lundy

Just over a year ago, nearer the start of the impact of covid-19 on the global airline industry, Singapore Airlines also known as "<a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">SIA (SIA SP)</a>" announced a pair of rights offerings meant to shore up its capital base, and to allow it to survive through the pandemic. The rights offerings required a Circular, and a shareholder meeting to approve them, then Singapore Air raised S$5.3bn in New Shares and S$3.5bn in Mandatory Convertible Bonds (MCBs). The shareholder meeting of summer 2020 also allowed for Singapore Air to raise up to S$6.2bn of Additional Rights MCBs within 15 months of the original shareholder meeting. Last week on Wednesday night, Singapore Air <a href="https://links.sgx.com/FileOpen/Launch%20Announcement%202021.ashx?App=Announcement&amp;FileID=667006" target="_blank" rel="noopener">announced</a> the launch of a renounceable rights offering for S$6.2bn of Mandatory Convertible Bonds, following on from last year. The <a href="https://links.sgx.com/FileOpen/Notice%20of%20Record%20Date%20.ashx?App=Announcement&amp;FileID=667008" target="_blank" rel="noopener">record date</a> will be 28 May 2021.The company also announced <a href="https://links.sgx.com/FileOpen/slide-q4fy2021.ashx?App=Announcement&amp;FileID=667066" target="_blank" rel="noopener">results</a>, with a full-year net loss of S$4.3bn after passenger traffic is down 97.9%, including S$1.953bn in impairment charges. Non-fuel expenditures dropped by more than half, but that was still not enough to overcome the severe drop in flight mile revenues (-76.1%; -94.7% for passenger flights)), despite a significant increase (+38.8%yoy) in cargo revenues.The company ended the year with S$7.8bn in cash and bank balances against S$14.3bn of debt. NAV per share was S$5.36/share vs S$7.86 a year earlier on 31 March 2020.None of this should be a surprise. That Singapore Airlines had raised S$15.4bn since April 2020 (S$8.8bn in rights issues, S$2.1bn in secured financing, S$2.5bn in convertible bonds ($850mm 1.625% in Dec 2020), notes, and credit lines, S$2.1bn of secured financing against aircraft, and earlier this month a S$2.0bn sale and leaseback of 11 aircraft), lost S$2.5bn this year on an operating basis, and in February the company <a href="https://links.sgx.com/FileOpen/NE-0621%20.ashx?App=Announcement&amp;FileID=647770" target="_blank" rel="noopener">deferred S$4bn</a>of aircraft delivery over the next four fiscal years) and lowered non-fuel expenditures by S$5bn annually should be a positive outcome.But another S$6.2bn of MCBs is not bullish. Just as the first S$8.8bn was not bullish last year. More below the fold.

Just over a year ago, nearer the start of the impact of covid-19 on the global airline industry, Singapore Airlines also known as "SIA (SIA SP)" announced a pair of rights offerings meant to shore up its capital base, and to allow it to survive through the pandemic. The rights offerings required a Circular, and a shareholder meeting to approve them, then Singapore Air raised S$5.3bn in New Shares and S$3.5bn in Mandatory Convertible Bonds (MCBs). The shareholder meeting of summer 2020 also allowed for Singapore Air to raise up to S$6.2bn of Additional Rights MCBs within 15 months of the original shareholder meeting. Last week on Wednesday night, Singapore Air announced the launch of a renounceable rights offering for S$6.2bn of Mandatory Convertible Bonds, following on from last year. The record date will be 28 May 2021.The company also announced results, with a full-year net loss of S$4.3bn after passenger traffic is down 97.9%, including S$1.953bn in impairment charges. Non-fuel expenditures dropped by more than half, but that was still not enough to overcome the severe drop in flight mile revenues (-76.1%; -94.7% for passenger flights)), despite a significant increase (+38.8%yoy) in cargo revenues.The company ended the year with S$7.8bn in cash and bank balances against S$14.3bn of debt. NAV per share was S$5.36/share vs S$7.86 a year earlier on 31 March 2020.None of this should be a surprise. That Singapore Airlines had raised S$15.4bn since April 2020 (S$8.8bn in rights issues, S$2.1bn in secured financing, S$2.5bn in convertible bonds ($850mm 1.625% in Dec 2020), notes, and credit lines, S$2.1bn of secured financing against aircraft, and earlier this month a S$2.0bn sale and leaseback of 11 aircraft), lost S$2.5bn this year on an operating basis, and in February the company deferred S$4bnof aircraft delivery over the next four fiscal years) and lowered non-fuel expenditures by S$5bn annually should be a positive outcome.But another S$6.2bn of MCBs is not bullish. Just as the first S$8.8bn was not bullish last year. More below the fold. 

Singapore Air Rights MCBs - S$6.2bn of Capital Suck

Singapore

Singapore Airlines Limited provides air transportation, engineering, pilot training, air charter, and tour wholesaling services. The Company's airline operation covers Asia, Europe, the Americas, South West Pacific, and Africa.

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Singapore Airlines (SIA SP)

Airport of Thailand (AOT): Phuket Sandbox

The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2)...

Henry Soediarko

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

Last Week in Event SPACE: Sing Air, JD Logistics, China Mobile, Angang/Bengang, Link Admin, Xiaomi

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Samsonite (1910): Channel Checks Recovery

Air travelers has started to recover implying that Samsonite's business recovery story is solid while the management has also coped efficiently...

Henry Soediarko

Singapore Air Rights MCBs - S$6.2bn of Capital Suck

Singapore Air issued S$8.8bn of shares and Mandatory Convertible Bonds last year, with a management option to issue another S$6.2bn of MCBs. They...

Travis Lundy

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