Stellar Absolute and Relative Stock Returns Since We Initiated Our Research Coverage

3 July 2017, Asia Pacific – Time flies, Crucial Perspective is now 4 months old! We take this opportunity to review the performance of our stock ratings so far. In summary, the market-cap weighted coverage portfolio stock returns based on our stock ratings have yielded an absolute return of 12% so far. Note that as per our stringent company policy to ensure complete research independence, we do not have any stock positions in the companies under our coverage. Furthermore, we do not receive any compensation or benefits from the companies under our coverage.

WE HAVE INITIATED RESEARCH COVERAGE ON 9 COMPANIES SO FAR SINCE OUR LAUNCH

Since our launch, we have initiated research coverage on 9 companies, including Air China (753:HK), AirAsia (AIRA:MK), Cathay Pacific (293:HK), China Eastern Airlines (670:HK), China Southern Airlines (1055:HK), Orient Overseas International (316:HK), Singapore Airlines (SIA:SP), SIA Engineering (SIE:SP) and ST Engineering (STE:SP).

8 OUT OF OUR 9 STOCK RATINGS HAVE YIELDED POSITIVE ABSOLUTE STOCK RETURNS OF 12% SO FAR – OOIL (+29%), AIR CHINA (+26%) & CHINA SOUTHERN AIRLINES (+16%) ARE OUR BEST CALLS

In terms of absolute share price performance since our research coverage initiation, 8 out of our 9 stock ratings have yielded positive stock returns. In summary, the market-cap weighted coverage portfolio stock returns based on our stock ratings have yielded an absolute return of 12% so far.

Our Outperform rating of Orient Overseas International (OOIL) has been our best stock call so far – OOIL’s share price has risen 29% since we initiated research coverage on 14th March 2017.

Chart: Absolute performance of Crucial Perspective’s ratings since our research coverage initiations

Chart: Absolute performance of Crucial Perspective’s ratings since our research coverage initiations

This is followed by our Outperform rating of Air China, whose share price has risen 26% so far since we initiated coverage. We mentioned that Air China is our top pick among the Chinese carriers when we initiated research coverage on 4th April 2017 and it has indeed outperformed China Southern Airlines (which is our third best-performing stock call) and China Eastern Airlines whose share prices have risen 16% and 5% since we initiated coverage on these stocks on 10th April 2017.

Our only ineffective stock call was our Underperform rating of Cathay Pacific – Cathay’s share price has risen 6% since we initiated research coverage on 16th March 2017 although note that Cathay’s share price has underperformed the market by 2% as the Hang Seng Index (HSI) rose 8% during the same period.

8 OUT OF OUR 9 STOCK RATINGS HAVE ALSO BEATEN THEIR RESPECTIVE MARKET INDICES BY A SIGNIFICANT MARGIN OF 11% – AIR CHINA (+26%), OOIL (+21%) & CHINA SOUTHERN AIRLINES (+15%) ARE OUR BEST CALLS

In terms of relative share price performance since our research coverage initiation, 8 out of our 9 stock ratings have beaten the performance of their respective market indices by a significant margin. In summary, the market-cap weighted coverage portfolio returns based on our stock ratings have outperformed the market by 11% so far.

Our Outperform rating of Air China has delivered the strongest returns relative to the market index – Air China has outperformed the Hang Seng China Enterprises Index (HSCEI) by 26% since we initiated research coverage on 4th April 2017.

Chart: Relative performance of Crucial Perspective’s ratings since our research coverage initiations

Chart: Relative performance of Crucial Perspective’s ratings since our research coverage initiations

This is followed by our Outperform rating of OOIL which has outperformed the Hang Seng Index by 21% since we initiated research coverage on 14th March 2017.

In third place is China Southern Airlines which has outperformed the HSCEI by 15% since we initiated coverage on 10th April 2017.

Our only ineffective stock call was our Outperform rating of Singapore Airlines (SIA). Although SIA’s share price has risen 2% since we initiated research coverage on 11th March 2017, it has underperformed the market by 1% as the Straits Times Index rose 3% during the same period.

DETAILED CALCULATION OF STOCK RETURNS

To ensure transparency of our calculations, please see below the full details of our ratings and fair values as well as the computed absolute and relative stock returns:

Chart: Performance of Crucial Perspective stock ratings since our research coverage initiations

Chart: Performance of Crucial Perspective stock ratings since our research coverage initiations

Note: Stocks with upside of more than 10% based on our fair value are assigned an Outperform rating. Stocks with downside of more than 10% based on our fair value are assigned an Underperform rating. Stocks with upside or downside of less than 10% based on our fair value are assigned an In-line rating. These are Crucial Perspective’s proprietary rating classifications and by no means serve as investment recommendations.

Related Reports:

Here are the links to all our company initiation research reports for your reference:

Air China Initiation Research Report 2017: Top choice among the Chinese airlines

AirAsia (AIRA:MK) Initiation Research Report 2017 – Cost Leadership, Extensive Network & Strong Branding

Cathay Pacific Airways (293:HK) Initiation Research Report 2017 – Cathay Pacific outlook to stay gloomy?

China Eastern Airlines Initiation Research Report 2017: Rapid improvement but aggressive expansion risk abounds

China Southern Airlines Initiation Research Report 2017 – Strong domestic drivers tempered by funding needs

Orient Overseas (International) Ltd. Initiation Report – Still good value based on key fundamentals and potential takeover

Singapore Airlines Initiation Research Report 2017: Will SIA be a “sexy” stock again?

SIA Engineering (SIE:SP) Initiation Research Report 2017: Well-positioned to leverage on potential MRO upturn

Singapore Technologies Engineering (STE:SP) Initiation Research Report 2017 – Strong orderbook as MRO, Infrastructure & Defense spending increases

 

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