Beijing Capital International Airport (694 HK)

H O N G
R e t a i l
M a r k e t
M o n i t o r
STOCK FOCUS
Beijing Capital International Airport (694 HK)
2013: Results In Line With Expectations; Strong Free Cash Flow Is Key
Attraction
Results were broadly in line but BCIA guided for a more moderate growth in 2014. Still,
we expect BCIA to generate strong cash flow. At our target price, the stock offers a
decent 2.8% dividend yield and attractive free cash flow yield of 6.8%. Maintain BUY.
Target price: HK$7.00.
RESULTS
Earnings broadly in line, boosted by lower business tax and higher landing charges.
Aeronautical revenue growth was underpinned by higher passenger service charges
(PSC) and an increase in international landing charges. Non-aeronautical revenue was
underpinned by a steep rise in carpark revenue, while concession-based revenue grew
a marginal 1.4% yoy. A move to the VAT regime and exclusion of international
aeronautical revenue as taxable revenue led to a 61% yoy decline in business tax,
excluding which, net profit would have risen by a lower 6.3% yoy.
Marginal 0.9ppt decline in EBITDA margin but not a concern. EBITDA margin at 53.6%
is still very healthy and the decline was mostly due to an increase in leasing cost
(terminal 3D Rmb 131.3m) and higher maintenance costs. The latter is likely to stabilise
in the years ahead. Retail spending per pax grew at the slowest pace in three years.
Excluding the VAT impact, retail sales rose 5.7% yoy, while per pax retail sales would
have risen 3.4% yoy. The relatively slow sales reflected the generally weaker economic
conditions. Management also noted that retail sales will be impacted by weaker
international pax throughput. We have assumed a slower 1% yoy growth for 2014.
STOCK IMPACT
Cautious 2.0-2.5% pax throughput growth for 2014 and BCIA expects only single digit
profit growth. At the post results conference, management indicated that air travel could
slow down in 2014 due to: a) Kunming knife attack, and b) the disappearance of
MH370. They also noted that the Beijing-Shanghai HSR diverted about 2% of domestic
air travel in 2013. BCIA is in talks with Tianjin airport to divert some of the domestic
flights to the airport to improve on-time performance (OTP). If it is successful and BCIA
achieves 90% OTP, there is scope for more slots to be allocated to BCIA. For 2014, we
assume a 2.1% yoy rise in pax throughput.
K O N G
Friday, 21 March 2014
KEY INDICES
HSI Index
HSI Futures
HSCEI index
SHCOMP
DJI index
SPX index
NKY index
DAX index
CAC index
Prev
Close
21,182
21,160
9,203
1,993
16,331
1,872
14,224
9,296
4,328
Chg
(%)
-1.8
0.0
-1.7
-1.4
0.7
0.6
-1.6
0.2
0.5
YTD
(%)
-9.1
-9.3
-14.9
-5.8
-1.5
1.3
-12.7
-2.7
0.7
Price
(HK$)
Chg
(%)
Value
($m)
558.
00
3.06
1.96
67.0
0
4.92
-1.7%
-1.3%
15.3%
-3.6%
-1.8%
5084.9
2661.1
2296.4
2180.4
2095.1
Price
(HK$)
Chg
(%)
Value
($m)
0.52
2.41
0.09
7.40
1.96
55.2%
33.9%
22.7%
15.6%
15.3%
40.2
20.4
10.0
7.1
2296.4
Price
(HK$)
Chg
(%)
Value
($m)
0.58
100.
00
0.16
1.03
47.6
0
-27.5%
-25.9%
-18.2%
-15.6%
-14.0%
72.5
0.0
0.5
5.2
738.8
Source: Bloomberg
TOP VOLUME
Stock
TENCENT HOLDINGS
AGRICULTURAL-H
CHINAVISION MEDI
CHINA MOBILE
CHINA CONST BA-H
TOP GAINERS
Stock
OPES ASIA DEVELO
ALLIED CEMENT HO
SEE CORP LTD
FIRST NTUL FOODS
CHINAVISION MEDI
TOP LOSERS
Stock
CH FIN LEASING
CISCO SYSTEMS
ASIAN CAPITAL HO
AUTOMATED SYS
BYD CO LTD-H
Does not expect terminal 3D to break even in 2014. Management alluded to higher
costs, but indicated that overall utilisation will improve as Air China plans to move some
aircraft to the terminal.Shift in operating model for ground traffic centre will lower profits
but will also reduce debt and capex burden. Revenue from GTC assets (mainly
carpark) was obtained on a concession model. However, BCIA now shares the profits
with its parent, while the latter assumes the debt and depreciation burden. BCIA
alluded that the net impact is negative but is hopeful of an upward revision in carpark
fees. Management highlighted that BCIA had increased car parking fees in most areas
but not at BCIA.
Strong FCF is key attraction. In 2013, BCIA generated Rmb2.8b in free cash flow
(FCF). We see this declining to Rmb2.5b in 2014. Even so, this would translate into 12x
FCF, or an attractive 8.3x FCF yield at HK$5.79.
EARNINGS REVISION/RISK
We lower our 2014 net profit forecast by 7.4% to reflect a projected forex loss of
Rmb45m on US$-denominated loans as well as lower retail spending.
VALUATION/RECOMMENDATION
Maintain BUY. We continue to value BCIA on a DCF basis until 2017 and assume a 1%
terminal growth rate and WACC of 9.3%. Our target price is raised marginally to
HK$7.00 (from HK$6.70) due to stronger-than-expected cash flow.
SHARE PRICE CATALYST
Increase in parking charges and stronger-than-expected traffic growth.
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ANALYSTS
K Ajith
+65 6590 6627
[email protected]
Angela Zhou
+8621 5404 7225 x 858
[email protected]
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K O N G
Friday, 21 March 2014
TRADERS’ CORNER
Hang Seng Index
Reiterate Our Earlier Forecast
The Hang Seng Index ended last Friday lower at
21,539. The index penetrated the 0.618x
retracement level to close yesterday at 21,182;
shy of the upside gap at 21,044.
Against the backdrop of MACD, we reiterate the
index will test the 0.76x retracement level at
20,537 after it completely re-fills the previous
upside gap at 21,044.
If the 20,537 level fails as the support, the index
will see increasing odds to test the key low at
HK$19,426.
\
Swire Pacific (19)
Moving Within The Symmetrical Triangle
Swire Pacific is moving within a symmetrical
triangle.
With reference to the increasing On Balance
Volume Indicator (OBV), the stock is looking for
an upside breakout.
According to the size of the triangle, an upside
breakout will propel the stock to reach
HK$93.13.
On the other hand, the first support is at
HK$83.15 in case of a downside breakout.
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K O N G
Friday, 21 March 2014
Beijing Airport (694)
Bullish Divergence of Slow Stochastics
We observe a bullish divergence in the Slow
Stochastics and share price of Beijing Airport.
The stock has re-filled the previous downside
gap and is bouncing towards the parallel
channel top near HK$6.00.
If the stock penetrates the HK$6.00 level, it will
be ready to test the previous high at HK$6.41.
Meanwhile, stop-loss is at HK$5.50.
Source: HKET Net
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ANALYST
Barole Shiu, CMT
+852 22366716
[email protected]
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K O N G
Friday, 21 March 2014
MARKET NEWS
China Mobile: Profit declines 5.9% yoy
China Mobile will spend more this year on its 4G network expansion to counter its first
annual profit decline in 14 years. The decline was attributed to pressure from mobile
messaging services like WeChat. The company will increase CAPEX by 22% to Rmb225.2b.
It also plans to sell 100m 4G smartphones and tablets this year.
Agencies, China Daily
Tencent: Proposes stock split
Tencent has proposed a one-to-five stock split in a bid to lower the investment threshold.
Smaller investors will then be able to afford to invest in the company after the stock split.
The split, pending approval is expected to be effective on 15 May.
China DailyCN
Huawei: To become no.2 smartphone vendor
Huawei Technologies aims to become the world’s second largest smartphone vendor by
2015. Huawei is already ranked no.3 globally as of 4Q13. The company plans to ship 80m
units this year, boosting its global market share to 10% by year end, up from 4.8% currently.
China Daily
Financials: China cuts red tape in approval process for rural banks
The CBRC will simplify administrative procedures for establishing rural commercial banks
and credit cooperatives. A total of 13 procedures will be scrapped, including approvals over
the appointment of senior management, and stock collateral loan business. The new rules
are to simplify the conditions for setting up rural banks and credit cooperatives and make it
easier for all types of capital to participate in building the rural financial system.
Xinhua, China Daily
Industrials: Airliners lose on Rmb weakness
China airlines lost Rmb700m on Forex in February 2014 alone, while they earned Rmb100m
of Forex income in the same month in 2013.
China Daily
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H O N G
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Friday, 21 March 2014
Disclosures
As of 21 March 2014, the analyst and his/her immediate family do not hold positions in the respective securities
recommended in this report.
We have based this document on information obtained from sources we believe to be reliable, but we do not make any
representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.
Expressions of opinion contained herein are those of UOB Kay Hian (Hong Kong) Limted only and are subject to change
without notice. Any recommendation contained in this document does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific addressee. This document is for the information of the addressee
only and is not to be taken as substitution for the exercise of judgement by the addressee. This document is not and should
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