Airports

Global Airports valuations at discount to Aerospace but premium to Airline stocks

Global – The global airports & airline service providers sector is trading at 20.5x P/E currently, a 16% discount to its historical average valuation in the past 5 years. Comparing the P/E valuations of the three inter-linked sectors, the global airports and airline service providers sector is currently more expensive than the global airlines sector but cheaper than the global aerospace sector.

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Which Asian transport stocks are more resilient in a China-US trade war?

Asia Pacific – As the transport sector is largely trade-driven and often global in nature, the conventional wisdom would be to de-risk and offload all investment holdings in this sector. Is there any place to hide for equity investors in the transport sector as trade tensions escalate between the United States and China? We highlight the more resilient stocks for those who wish to stay invested in the Asian transport sector below:

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Beijing, Guangzhou, HNA airports to suffer sharp earnings decline in 2019

China– The State Council of China has just approved the abolition of the policy of recognizing refunds from the Civil Aviation Development Fund (CADF) to three listed airports – Beijing Capital International Airport, Guangzhou Baiyun International Airport and HNA Infrastructure Company which will significantly hurt their financial results, especially from 2019.

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Our stock returns beat the Street by 10% in the past year

Time flies, Crucial Perspective is now 15 months old! We take this opportunity to review the performance of our stock ratings. Our absolute return based on our stock calls was 17.4%, outperforming all the analysts on the Street’s returns by 10% in the past 1 year, according to Bloomberg’s tally.

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Boeing to lose China market share to Airbus and COMAC

Global – 45% of all aircraft owned by China buyers are built by Boeing, slightly ahead of Airbus’ market share of 43%. However, Boeing will lose its market share dominance in the coming years as Airbus has nearly twice as many aircraft orders placed by China buyers as Boeing and China could potentially retaliate against the United States’ current and future tariffs. Moreover, home-grown COMAC also has a huge order backlog which could reduce China’s reliance on the two aircraft manufacturing giants in the longer term if its C919 and C929 programmes prove successful.

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Record 11.4 Million passengers during 2018 Chinese New Year bodes well for Chinese airlines

China – The entire Chinese airline sector carried a record 11.4 Million passengers during the 7-day Chinese New Year holiday season, registering a record 16% growth compared to 12% in 2017, 8% in 2016 and 7% in 2015. For outbound Chinese tourists, the percentage of independent travelers continue to increase with a 48% share for the 2018 Chinese New Year period. We remain bullish on the Chinese airline stocks.

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Photo Highlights from Singapore Airshow 2018

We spent the week at the Singapore Airshow 2018, Asia’s largest aerospace and defence event. Check out our photo highlights from this exciting event featuring static aircraft displays especially the Airbus A350-1000, Embraer E190 E2 & Lockheed Martin F-35B to spectacular aerobatic flying displays; our personal favourites were by the Indonesian Air Force (TNI-AU) Jupiter KT-1B and the Republic of Singapore Air Force F-15SG + F-16C .

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Winners & Losers from worsening China-Taiwan tensions

Asia – In our earlier 11th Jan 2018 report, we flagged concerns that China-Taiwan tensions might further worsen over the cross-straits airspace dispute. Our concerns were confirmed yesterday when China Eastern Airlines and Xiamen Airlines cancelled 106 and 70 additional flights to Taiwan respectively. We expect China-Taiwan relations to continue worsening till at least after Taiwan’s mid-term local municipal elections in late 2018. We downgrade our rating for Taiwan’s China Airlines (2610:TT) to Underperform…

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Air Cargo to surge in 2018, benefitting Asian airlines most

We are bullish on the global air cargo outlook in 2018 and forecast the global air cargo industry capacity to grow only 3%-4% per annum from 2018 to 2022 while demand will surpass this, growing at 5%-6% in 2018. This will lift the industry’s cargo yields and profitability. Notably, global air cargo yields surged 17% y/y in November 2017 after five years of decline. The Asian airlines are the key beneficiaries as they carry nearly 40% of global air cargo.

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Chinese airlines to dominate under landmark China-UK agreement

China – China & the UK have concluded a landmark agreement for a 50% increase in flights between the two countries, effectively increasing the flight capacity to 150 flights/week. While this development is positive for airlines in both countries, we expect the Chinese airlines to dominate given their more competitive cost structures (with 30% lower non-fuel unit costs), enabling them to offer more attractive fares to gain market share, particularly for the leisure segment.

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Airlines are sitting on US$100 Billion Inflight Big Data goldmine

Global – Crucial Perspective is launching a groundbreaking airline & tech industry primer. We estimate the collection and monetisation of global Inflight Big Data can boost airline revenue by US$100 billion per year. This will redefine air travel in the years to come. In 2016, the world’s airlines flew 3.8 billion passengers, clocking about 9.3 billion Inflight passenger hours, with virtually all this Inflight Big Data not collected and monetised by the airlines …..

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Low-Cost Carrier (LCC) market share in Japan to triple by 2027

Japan – With Scoot’s impending launch of long-haul international flights between Osaka Kansai Airport and Honolulu from 19th December 2017, following the footsteps of AirAsia X’s Osaka-Honolulu services which began on 28th June 2017 and AirAsia Japan’s Nagoya-Sapporo domestic flights launch from 29th October 2017, we assess the outlook of the low-cost carrier market in Japan.

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Our Absolute Stock Returns Beat the Street Since We Initiated Research Coverage

Global – Crucial Perspective is now 8 months old! We take this opportunity to review the performance of our stock ratings so far. Based on Bloomberg’s tally, our absolute return was 13.5% and has outperformed our peers’ returns by 9ppts in the past 6 months based on stock ratings. Our stock returns rank us in the #1 position among all analysts for our Outperform ratings on Orient Overseas International and for AirAsia, 2nd position for Air China …..

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Asiana, China Eastern, KAL, Spring to soar as China-South Korea ties mend

South Korea – In light of yesterday’s announcement by China and South Korea of a formal agreement to restore economic ties, we provide further analysis on which airline equities are set to gain the most. Asiana Airlines (plus its low cost carrier Air Busan), Korean Air (plus its low cost carrier Jin Air) and China Eastern Airlines are the top three most dominant airlines in the China-South Korea route region with 30%, 25% and 14% market shares respectively.

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Which region in the world buys the most ships and aircraft?

Global – It’s no surprise that the Asia Pacific region is now the world’s largest buyer of ships and aircraft. However the scale is staggering with the Asia Pacific region accounting for 50% and 34% of the total shipping and aircraft capacity on order. By the time these orders are delivered, the Asia Pacific region will become the world’s second largest aircraft owner with 29% market share and the second largest ship owner position with 41% market share.

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China’s Big 3 Airlines to report weaker 3Q17 results but benign 4Q17 capacity to lift yields

China’s Big 3 Airlines just reported their 9M17 operating statistics, reflecting more moderate passenger traffic growth of 10% from 11% in 1H17. This was flagged in our previous report on 18 July 2017. As China’s Big 3 Airlines’ share prices have corrected 19% since July 2017, weakness in the upcoming 3Q17 results are already largely priced in. We now turn our focus on analysing the Chinese airlines’ 4Q17 capacity growth & their implications on the airlines’ yields and profitability.

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Research Report: Chinese Airports (694:HK, 600009:CH) may see near-term price correction

China – Following the Chinese airports’ share price rally of 40% ytd, we see a rising risk of share price correction near term. Based on our analysis of the airlines’ planned flights schedules for 4Q17, the total number of flights and seat capacity handled at Shanghai International Airport (600009:CH) will decline in 4Q17 while Beijing Capital International Airport (694:HK) will see limited capacity growth.

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AirAsia (China) adds partners but lack of Henan govt stake raises risk of other entrants

China – AirAsia Bhd (AIRA:MK) announced new partners for its proposed Zhengzhou-based LCC JV, AirAsia (China). The addition of Plato Capital Limited (PLC:SP) will increase AirAsia’s management influence in this joint venture airline as AirAsia Group Founders each have a 6.33% indirect stake in Plato Capital. AirAsia will still have a working relationship with the Henan Government Working Group under the original MoU signed in May 2017 but the absence of a direct equity stake  by the Henan provincial government …

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Airline Industry impact analysis from North Korea’s thermonuclear test and geopolitical tensions

Asia Pacific – North Korea’s thermonuclear test on Sunday has heightened geopolitical tensions in the Korean Peninsula and the broader Asia Pacific region. This escalating tensions could drive travellers to postpone or cancel their trips to South Korea which is a popular tourist destination. This will hurt Korean Air, Asiana as well as Southeast Asian airlines AirAsia X, Vietnam Airlines and VietJet the most.

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AirAsia Bhd (AIRA:MK)’s stake in planned China JV likely to be capped at 25%

China – AirAsia Bhd (AIRA:MK) signed a memorandum of understanding with China Everbright Group and the Henan Government Working Group to establish AirAsia (China), a low-cost carrier to be based in the Henan provincial capital of Zhengzhou.The shareholding of the joint venture, AirAsia (China) has yet to be finalised but we believe that that it will be …..

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China Outbound Tourism Analysis – Winners and Losers

Global – The China outbound tourism boom is showing no signs of abating with growth of 8% y/y in 1Q17, an improvement from the 4% growth achieved in full year 2016. We take a closer look at some of the countries and equities that are benefitting the most as well as the others that have missed out on this growth.

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Will Japan benefit from China travel curbs to South Korea?

Japan – Will Japan benefit from China travel curbs to South Korea? We expect the Chinese outbound tourists to bypass South Korea and travel to other destinations in Asia near term following the Chinese government’s more stringent travel advisory on South Korea.

Japan is one of the most popular travel destinations for Chinese outbound tourists and is a natural alternative travel destination for the Chinese given its more similar average flight duration. The answer to the question …..

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Impact of China travel curbs to South Korea – Winners & Losers

South Korea – We assess the impact of China travel curbs to South Korea. Background: Korea Joongang Daily reported on 4th March 2017 that the Chinese government has instructed the travel agencies to stop selling tour packages to South Korea starting from 15th March 2017 in the latest retaliation against the deployment of the United States’ Terminal High Altitude Area Defense (THAAD) system in South Korea. Chinese travelers can still visit Korea if they do direct ticket bookings and free-and-easy trips.

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Airlines Demand Supply Analysis in the Asia Pacific

Asia Pacific – Our Airlines Demand Supply Analysis expect air travel demand and supply growth to be better matched going forward, from supply growth (+10% y/y in 2016) surpassing demand growth (+9% y/y in 2016) to nearly balanced demand-supply growth of 9% in 2017. As per capita income continues to rise in the region, the Asia Pacific airline sector’s air travel demand is expected to grow 8% per annum in 2018 and 2019 …

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Brief overview of the airline sector capacity deployment in 1H17

Asia Pacific – The Asia Pacific airline sector carries the world’s largest share of passenger traffic, accounting for 33% of the global revenue passenger kilometres (RPKs). The sector has been growing passenger capacity in terms of available seat kilometres (ASKs) by 8% y/y in 2016 with passenger load factors improving 0.8ppts y/y to 79.7% as passenger traffic grew 9% based on IATA’s statistics.

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Global airline industry supply outlook in the next 5 years

Global – Industry oversupply has driven intense fare competition in the past 6 years, depressing most Asian airlines’ profitability even after oil prices halved. When will we see better days? We take stock of the global aircraft orders to assess the industry’s supply outlook in the next 5 years. We expect the global airline industry supply outlook (especially Asian airline industry’s overall supply growth) to moderate in the coming years.

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1H17: Capacity expansion and cutbacks among airlines in Asia

Asia – We analyze the Asia airlines’ near term flight schedules to determine which major route regions and airlines may face greater or lower load factor and yield pressure due to their near term capacity plans. Here are our key findings – In Asia, which is the largest route region for the Asia Pacific aviation sector, IndiGo, Lion Air and Shandong Airlines have the most aggressive capacity growth plans in 1H17 while …

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