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1、 Disclosures upgrade GBIAC to Buy from Hold and maintain Buy on SIA and Hold on Spring Airlines Part of air travel demand is likely to be delayed rather than lost We believe air travel demand in China is likely to be delayed to 2H20e similar to what happened during the SARS outbreak in 2003 Given th
2、e widespread nature and the number of people affected by the current coronavirus outbreak we believe half of the recently suppressed travel demand is likely to be delayed rather than fully lost Traffic is more likely to record a mild drop Thanks to the change in the international passenger mix since
3、 2003 outbound international traffic accounted for 53 4 in 2018 2003 18 with tier 1 cities recording an even higher outbound percentage 61 3 in 2018 As outbound international traffic was less negatively impacted than inbound traffic during the 2003 04 SARS outbreak we believe international traffic i
4、s more likely to drop by a low magnitude during the current coronavirus outbreak Although the WHO declared the coronavirus outbreak a public health emergency of international concern PHEIC on 30 January 2020 the number of countries restricting or banning entry of mainland Chinese travellers and or t
5、hose who have been to mainland China so far is around half of the number during the SARS outbreak We expect tier 1 airports to record a mild to moderate drop in earnings in 2020e Benefitting from low unit cost solid margin and more exposure to short haul international routes that do not have many tr
6、avel restrictions low cost carriers LCCs are likely to be less affected than full service carriers in our view Scenario analysis draws the bottom line Our scenario analysis assuming a 10 15 and 20 y o y drop in passenger traffic throughput in 2020e for SIA and a 5 10 and 20 y o y drop for GBIAC sugg
7、ests a 15 24 and 32 decline in PAT for SIA and a 23 41 and 79 decline for GBIAC respectively For Spring Airlines a 2 6 and 10 y o y passenger traffic decline will likely lead to a 53 76 and 99 PAT drop respectively Upgrade GBIAC to Buy from Hold and maintain Buy on SIA and Hold on Spring Airlines Lo
8、wer earnings estimates and update our target prices SIA is our top pick David Wu S1700518110001 Head A share Transportation when it is between 5 and 20 above the current share price the stock may be classified as a Buy or a Hold when it is between 5 below and 5 above the current share price the stoc
9、k will be classified as a Hold when it is between 5 and 20 below the current share price the stock may be classified as a Hold or a Reduce and when it is more than 20 below the current share price the stock will be classified as a Reduce Our ratings are re calibrated against these bands at the time
10、of any material change initiation or resumption of coverage change in target price or estimates Upside Downside is the percentage difference between the target price and the share price Prior to this date HSBC s rating structure was applied on the following basis For each stock we set a required rat
11、e of return calculated from the cost of equity for that stock s domestic or as appropriate regional market established by our strategy team The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon The performance horizon was 12 months Fo
12、r a stock to be classified as Overweight the potential return which equals the percentage difference between the current share price and the target price including the forecast dividend yield when indicated had to exceed the required return by at least 5 percentage points over the succeeding 12 mont
13、hs or 10 percentage points for a stock classified as Volatile For a stock to be classified as Underweight the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months or 10 percentage points for a stock classified as Volatile Stocks between
14、 these bands were classified as Neutral A stock was classified as volatile if its historical volatility had exceeded 40 if the stock had been listed for less than 12 months unless it was in an industry or sector where volatility is low or if the analyst expected significant volatility However stocks
15、 which we did not consider volatile may in fact also have behaved in such a way Historical volatility was defined as the past month s average of the daily 365 day moving average volatilities In order to avoid misleadingly frequent changes in rating however volatility had to move 2 5 percentage point
16、s past the 40 benchmark in either direction for a stock s status to change Equities Airports Airlines 13 February 2020 20 Rating distribution for long term investment opportunities As of 13 February 2020 the distribution of all independent ratings published by HSBC is as follows For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models under our previous model Overweight Buy Neutral Hold and Underweight Sel
