[ET Net News Agency, 25 September 2019] J.P. Morgan raised its target price for China
Southern Airlines (CSA)(01055) to HK$6 from HK$5.1 and upgraded its rating to "overweight"
from "neutral" mainly on revised USD/RMB assumptions at 7.10/7.20/7.25, versus
7.35/7.40/7.40 previously.
The research house said CSA remains the most sensitive to macro factors such as further
Rmb depreciation against the USD and worsening of US-China trade tensions. JPM also
modeled in a lower increase in depreciation costs from 2H onwards, arising from the phase
1 opening of its facilities at the new BDA, based on the latest guidance.
Although CSA now has the highest share price upside among the Big 3, JPM still prefers
Air China (00753) and China Eastern Airlines (00670) in the current environment due to
lower conviction on CSA whilst macros remain highly uncertain.
It noted that 1.09bn of CSA's A-shares will be freed from share lock-up on 26 September
2019, but JPM does not expect any massive sell-off after that, because most of the shares
facing lock-up expiry are held by government-related (e.g. China National Aviation Fuel)
or strategic investors (e.g. Spring Airlines). (KL)