Airlines and tech earnings will reveal extent of Asia's reopening boost
By Felix Tam, Natalie Choy, Zoe Ma and Alfred Liu
(Bloomberg) — The reopening theme has been playing out in Asia for a few quarters and investors may get a further glimpse of whether the exuberance can be justified from earnings of airlines and tech companies this week.
Singapore Airlines Ltd. and Qantas Airways Ltd. have been barometers for this trend, especially long-haul, international passenger and cargo traffic. Air freight yield is expected to reach about 10% above pre-pandemic levels by 2024 given greater freighter capacity mix, Citi analysts including Kaseedit Choonnawat and Lu Xu wrote in a note. They preferred carriers in North Asia over Asean as pent-up demand is yet to fully play out there.
The rebound in international travel for Chinese tourists has seen a slow start due to hurdles including visa requirements. Instead, visitors rushed to Hong Kong after the border fully reopened, which may boost new-home sales by developers including Sun Hung Kai Properties Ltd., according to Bloomberg Intelligence.
Chinese tech companies Baidu Inc. and Alibaba Group will also be under the spotlight this week after a recent rebound in their share prices. While China tech valuations are normalizing, the market may need to see evidence of an earnings recovery to sustain the price momentum, BI analyst Marvin Chen said.
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For more on what’s going on in other regions, see the US Earnings Week Ahead or the EMEA Earnings Week Ahead, and see the ESG Stock Watch for a selection of the environmental, social and governance themes that may come up on earnings calls.
Highlights to look for this week:
Monday: No major earnings expected.
Tuesday: Singapore Airlines (SIA SP) is set to release its third quarter earnings after market close. Accelerating passenger recovery momentum should result in a strong quarter for the carrier, buoyed further by lower jet fuel prices. Group airlines passenger load factor reached 89.7% last December — almost double from a year ago — supported by looser travel rules in Hong Kong, Japan, and Taiwan. SIA could manage its variable cost increases better than peers as it recovers to pre-Covid capacity. The group has avoided substantial headcount cuts through the pandemic, unlike Cathay Pacific and Qantas, and may escape the resulting staff shortages during capacity ramp-ups.
Wilmar International (WIL SP) is scheduled to disclose its earnings after market close. Ebitda growth is poised to slow further as the average palm oil price could fall from a year ago, hurting plantation earnings. The Singapore-based food giant is one of Adani Group’s oldest partners, holding a 44% equity stake in their joint venture, Adani Wilmar, which has a market value over $6 billion. Wilmar recently said the Hindenburg report hadn’t raised issues specific to Adani Wilmar and that it intends to continue supporting the unit.
Wednesday: Baidu (BIDU US) will report after the market close in Hong Kong. Its fourth-quarter revenue may turn flattish after a 9.8% sequential growth last quarter, according to Bloomberg consensus estimates. There is mounting interest from investors after the company recently affirmed its plan to publicly roll out its ChatGPT-like service in March. Still, it remains “too early” to assess whether it could turn into a new monetization opportunity, Citi analysts including Alicia Yap wrote in a note, adding that recovery in advertisement business and upside in cloud opportunity are supportive to Baidu’s growth. Alibaba (BABA US), which is scheduled to report earnings on Thursday, is also developing ChatGPT-like robot and conducting internal testing. The e-commerce behemoth can benefit from rebound in business and consumer sentiment in China after strict Covid-Zero curbs ended there, according to Bloomberg Intelligence.
Thursday: Qantas (QAN AU) is scheduled to report its first-half results before market open. The Australian flag carrier is expected to return to profit on booming travel demand, ending a streak of five consecutive half-yearly losses. The rise in earnings would have been driven by a surge in passenger profit as the airline ramped up capacity amid Asia’s reopening, and a steady decline in jet fuel prices from June highs, according to Bloomberg Intelligence. 1H ticket sales are seen close to the group’s prior record-high of A$8.3 billion, as domestic capacity is likely to have returned to about 2019 levels and international capacity rebounded to over 65% of pre-pandemic levels. The improving financial results will allow the airline to further slash borrowings and increases the chances of more shareholder returns. Air New Zealand (AIR NZ) is also expected to become profitable again in first half ended December 31. Continued strong travel demand as well as a recent decline in jet fuel prices have accelerated the airline’s financial recovery.
Sun Hung Kai Properties (16 HK), Hong Kong’s largest developer, is set to announce its first-half earnings after market close. The company could hit its contracted sales target for fiscal 2023 given its robust housing pipeline, Bloomberg Intelligence analysts wrote in a note. It could have sold about HK$15 billion ($1.9 billion) of properties in the first half ended December, representing about 40% of its annual target, they said. The outlook for the city’s housing market is improving as the recent border reopening with mainland China and the removal of most Covid-related restrictions in Hong Kong have boosted optimism.
Friday: Oversea-Chinese Banking Corp. (OCBC SP) will release its fourth quarter results before market open. The Singaporean lender is more vulnerable than local peers DBS and UOB due to its large wealth management and insurance businesses, which make up 50% of non-interest income. Eyes will also be on OCBC’s performance away from home as trade tensions continue. Greater China is the bank’s second-largest market after Singapore, accounting for nearly a quarter of operating income. The additional S$330 million capital requirement imposed for deficiencies in OCBC’s response to a local phishing scam is likely to hit its CET1 ratio by 0.21 percentage points, though it should still maintain a more conservative capital buffer than its peers.
—With assistance from Dominic Lau.
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