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Investor Notes - Phillip Securities (HK) Ltd
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12 Apr, 2021 (Monday)

            
ALI PICTURES(1060)
Analysis¡G
Ali Pictures Group (1060) strives to push forward its content production and integrated development. During the last two financial years, the Group has continued to upgrade its drama series production business and develop its prime productions. On the one hand, based on its insight into market and user needs from multiple dimensions, it reserved and developed a number of high-quality IPs in line with user needs and market trends; on the other hand, taking advantage of the overall content deployment and linkage to resources of Alibaba Group, it has made breakthroughs in terms of theme types, development capabilities as well as content production, and provided users with influential cultural content. The Group`s integrated development business consists of Alifish, Yulebao and production software business. The Group believes that by building infrastructure, innovating business models and enhancing efficiency, it will be able to further its accomplishment through the expansion of a single revenue stream of box office operations to diversity revenue streams. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $1.04, Target Price: $1.18, Cut Loss Price: $0.98


BILIBILI(9626)
Analysis¡G
Bilibili-SW (9626) is an iconic brand and a leading video community for young generations in China and is very popular among the Z+ generation. According to iResearch, over 86% of the Company's MAU were aged 35 and below in 2020, which is the highest among the major video-centric platforms in China. The company enables broad video-based content consumption scenarios centered around professional user generated videos, or PUGV, supplemented with live broadcasting, occupationally generated videos, or OGV, and more. In 2020, 91.4% of the total video views are of PUGV. The company has given MAU guidance, that they are targeting a MAU of 300 million by 2023. We are optimistic about the paying ability of the Z+ generation and the company's future monetization ability.
Strategy¡G
Buy-in Price: $820, Target Price: $900, Cut Loss Price: $780



China Southern Airlines (1055.HK) - Domestic Market Is in a Period of Rapid Recovery

Investment Summary

Losses Are Less Than That of the Industry under the severe attack from COVID-19

Under the impact of COVID-19 Pandemic, CSA reported a total revenue of RMB92,561 million in 2020, down by 40% YoY. The net loss attributable to shareholders was RMB10,847 million, with decrease in profit or increase in loss of RMB13,487 million YoY. The LPS was RMB0.77. In the same period last year, the EPS was RMB0.22. The EBIT was RMB16,126 million, down by 53.3% YoY. However, due to better performance in cargo business and a higher share of the domestic market, CSA's losses were less than that of the industry.

Cargo Business Is Thriving

Last year, the Company's passenger transportation business was seriously dragged by the pandemic. Passenger traffic turnover fell by 46.15% YoY. The capacity allocation decreased by 37.6% YoY. The PLF was 71.46%, down by 11.35 ppts YoY. Passenger transportation revenue was RMB70,534 million, down by 49.1% YoY.

Benefiting from the strong demand for air cargo for anti-pandemic materials, the Company's cargo revenue was RMB16,493 million, up by 71.5% YoY, of which international cargo revenue rose by 93.6%. Cargo revenue accounted for 19% of transportation revenue, up by 12.5 ppts YoY; while passenger transportation revenue accounted for 81%, down by 12.5 ppts YoY.

In terms of revenue quality, the RPK was RMB0.46, down by 6.1% YoY. Cargo and mail RTK was RMB2.27, up by 79% YoY. Due to the sharp contraction of supply, the unit revenue of passenger transportation and cargo businesses on international routes performed outstandingly, driving the overall yield to fall only slightly.

Costs Are Relatively Rigid

The costs were relatively rigid. Last year, CSA's operating expenses totaled RMB109.11 billion, down by 27% YoY, the decline was smaller than that of revenue. Specifically, jet fuel costs were RMB18,797 million, down by RMB24 billion or 56.1%. RMB10.61 billion was reduced due to the drop in oil prices, and RMB13,407 million was reduced due to the decline in fuel consumption. Other costs such as labor costs, depreciation and amortization, and maintenance costs were relatively rigid, only down by 10% and 0.12%, and up by 4.2%, respectively, YoY.

Sales expenses during the reporting period exceeded RMB5 billion, down by 35% over the same period last year; administration expenses were approximately RMB4 billion, basically the same as the same period last year, mainly due to the increase in office expenses, utilities and depreciation expenses caused by the transfer of Beijing Daxing Airport.

Financial expenses were approximately RMB3 billion, down by approximately 60% yoy, mainly due to an exchange gain of RMB3,485 million from substantial appreciation of the RMB, and 2019 saw the loss on exchange of RMB1.48 billion, but which was partially offset by approximately RMB4 billion of impairment loss on fixed assets.

Domestic Market Is in a Period of Rapid Recovery

Judging from the current flight reservations for the Qingming Festival and the Labor Day, domestic market demand is rapidly recovering. However, the international air passenger market is not optimistic in the short term due to the different levels of vaccine penetration in various countries. At the end of 2020, the number of aircraft registered by the Company was 867. During the reporting period, a total of 32 aircraft were delivered and 27 were withdrawn, with a net increase of 3. In the future, the Company will control the speed and types of aircraft introduced. It is expected that the average annual growth rate of the overall fleet size will remain at a mid-single digit. In terms of specific arrangements for capacity allocation, the Company will ensure that the share of flight time resources added by Beijing Daxing Airport is not less than 50%, and the share of flight time resources added by Guangzhou Baiyun International Airport is not less than 40%.

Investment Thesis

In accordance with the latest data, we adjust the estimate of the Company's EPS to RMB-0.09/0.27 in 2021/2022. The target price is HK$ 6.3, equivalent to 1.18/1.11x estimated P/B ratio for 2021/2022. Considering the stock price has recorded rise to a certain extent, the "Accumulate" rating is given . (Closing price as at 8 April)

Risk

Traffic demand languished for the deterioration of macro-economy;

The depreciation of the RMB against USD would bring exchange loss;

Oil prices rose exceeded forecast.

War, terrorist attacks, pandemic and other emergencies;

Irrational inter-industrial price war;

Financials

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Recommendation on 12-4-2021
RecommendationAccumulate
Price on Recommendation Date$ 5.850
Suggested purchase priceN/A
Target Price$ 6.300
Writer Info
Zhang Jing
(Research Analyst)
Tel: (+86 21 51699400-103)
Email:
zhangjing@phillip.com.cn

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