Tag Archives: China Southern Airlines

China Airlines Crash Land

China Eastern, 670 HK, CEA NY,  and China Southern, 1055 HK, ZNH hk posted moderate revenue increases of 4.3% and 10.6% respectively for the quarter but gross margins plummeted.

China Eastern q1 2017.PNG

hk filing

China Southern 1q 2017

hk filing

China Eastern managed to eke out an increase in net profit of 6.6%, but this was primarily thanks to the gain it recorded for transferring ownership of China Eastern Logistics to parent company CEA Holdings.   China Eastern’s capacity year to date increased by 10.8% (RPK), its load factor was at 81.6% for passenger, just 39.3% for cargo and mail. For the month of March, the passenger load factor declined by .76% points with the most profitable international routes down by 2.03% points. The freight load factor increased by .99% points.

China Eastern issued new H shares sold to Delta Airlines, DAL in 2015. Additionally, it issued new A shares to help finance its continuous airline purchases.  Shares issued to Delta totaled  465,910,000 and raised 6.4 Bill $HK at 7.49 $hk per share. China Eastern, 670hk, last  closed in Hong Kong at 4.08 $hk.

China Southern’s net profit declined by 42.4%, despite an increase in non-operating income of 26%.  China Southern’s year to date capacity increased by 12.6% (RPK), its load factor was at 82.6% for passengers, just 49% for cargo and mail.  For the month of March, the passenger load factor increased by 1.93% points with the most profitable international routes down by .11 %points . The freight load factor increased by 4.8% points.

China Southern issued 270,606,272 new H Shares of the Company at the subscription price of HK$1,553.28 million, representing HK$5.74 per share to American Airlines, AAL. China Southern 1055 hk, last closed at 5.18 $hk.

Besides the alarming drop in gross margins, year on year load factors are critical to watch as China and  South Korea tensions escalate over THAAD missile placement in China, which has already reportedly severely dropped Chinese travel to South Korea.

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Chinese Airlines Soar on Cargo Capacity Lift

China Eastern Airlines, 60015 SH, 670 HK,  CEA NYX, China Southern,  ZNH NYX,            1055 hk,   60029 sh, Air China, 60111 sh, 753 hk,  all up thanks to in cargo strengthening in the first quarter.  Since cargo load factors are still low, over-exuberant rise.

china airlines

Hang Seng Up While Shanghai Comp Drops

 

SH HK UP

Airlines stall. On the heels of an April Sell rating for China Southern, HK 01055;  Daiwa downgraded China Eastern, HK 00670 to  underperform, with a target price of 4 hkd from 3.8.  The research firm considered its expansion capacity for 2016 as too aggressive and the positive reaction to Shanghai Disney’s, DIS, opening in June, 2016, to be overly optimistic.

China Shenhua, HK  01088 , rose over 4% as it contemplated a spin-off of wind power assets. Shenhua Group appointed CICC, Goldman Sachs and UBS to reconstruct its wind power assets, Reuters’ IFR reported. IFR had reported in July 2015 that Shenhua Group plans to spin-off the wind power assets for listing in Hong Kong, raising about HK$6.24-7.8 billion. (Shenhua is a component of both the H.S.I, up .31%. and the H.S.E.I., up .4%).

BYD, hk  01211, auto company was up 2.94% following news of new model SUV’S.  This occurred a day after Bank of America trimmed its target price to   61.77 HKD, (last close: 42), but kept it at buy.

A day after signing an infrastructure agreement with Henan provincial government, China Railway, HK 00390, rose 3.37%.  (On April 1st, 2016, Citi rated it a buy, target price of 7.8hkd vs. last close of 6.14).

As analyzed here, Chow Tai Fook, HK 1929 , reported a whopping 26% drop in same store sales for the group in the 1st quarter of 2016.  This $7 Billion market cap company performance is a negative sign for Chinese discretionary and luxury stocks.

Hong Kong Airlines Soar

Buoyed by a hopefully stronger yuan as well as positive reports from the Singapore Airshow on Chinese airline strength, Hong Kong Listed Airlines soared.  Short-term gains look impressive until it’s noted how far they’ve fallen from their 52-week highs.  Cathay Pacific, with the highest p/e thanks to some of the best traffic growth, had less of a spurt thanks to its Hong Kong location and currency which has felt downdrafts from currencies in Australia, S. Africa,  Canada, Europe, New Zealand, and the UK.

Airlines Hong Kong

Whether these gains are warranted remains to be seen.  All four have felt the economic softness in their cargo business.  All four have committed to airline purchases in dollars, which makes a strong, stable yuan critical for China Southern, China Eastern and Air China. These four airlines are highly leveraged, relying heavily on short-term debt with CA/CL’S well below 1. Their saving grace has been low fuel costs along with government support.

 

Airlines Current Ratios