Shanghai Airport fell by the daily limit again, with 820,000 orders closed at 63.99 yuan, down 19% in less than two trading days, wiping 28.9 billion yuan off the total market value. The latest market value was 123.3 billion yuan.
Shanghai airport caused the continuous drop limit “culprit” may be a paper supplementary agreement. According to a recently signed supplementary agreement with China International Duty Free Corporation, Shanghai Airport’s duty-free shop rent in 2020 will immediately drop to 1.156 billion yuan from the original forecast of 4.158 billion yuan.
Affected by the epidemic, the duty-free “charter company” Shanghai Airport had lost the 3 billion yuan it had earned steadily, and the market turned to be more optimistic about the stronger bargaining power of China. As of the noon close of the 2nd day, the share price of China’s free again rose 7.59% (note: the 1st day up 3.89%), the share price at 329.24 yuan, the total market value of 642.8 billion yuan, this half trading day, the company’s market value increased 68.7 billion yuan.
Guarantee of rent to look at international traffic commission
On the evening of January 30, Shanghai Airport issued the “Notice on the Supplementary Agreement for the Signed Operation Right of the Duty Free Shop Project”, and the relevant fee revision will be implemented from March 1, 2020. Accordingly, the company confirms that the rental income of the duty-free shop in 2020 will be 1.156 billion yuan, which is significantly lower than before the epidemic. The realization of duty-free shop business income from 2021 to 2025 largely depends on the progress of the epidemic situation and the recovery of passenger flow in Pudong International Airport and Hong Kong, Macao and Taiwan regions, which is uncertain.
Supplementary agreement means that China will exempt its day rent of Shanghai to pudong airport, from the guaranteed fixed, become and pudong international airport and Hong Kong, Macao and Taiwan regions of the passenger flow less closely related, the international passenger traffic routes, duty-free revenue less, take into Shanghai airport, but when the passenger flow is much, much more revenue, a tax-free shop Shanghai airport can only take the guaranteed has a ceiling.
At present, the epidemic situation abroad has not been effectively controlled, and the international passenger flow of Shanghai Airport is difficult to recover in the short term.
Since 2018, Shanghai Airport and Japan Shanghai signed the Contract of Transfer of Operation Right of the Duty Free Shop Project at Shanghai Pudong International Airport, the commission income from duty free shops has been occupying an important proportion in the income composition of Shanghai Airport.
According to the contract, Shanghai is required to pay 42.5 percent of its monthly sales to the Shanghai airport as rent or a guaranteed sales commission, whichever is higher, from 2019 to 2025.
In other words, according to the previous contract, the Shanghai airport would take 425 yuan for a customer who bought 1,000 yuan of lotion at a duty-free shop in Shanghai on Sunday at Pudong airport.
According to the estimate at that time, the smooth implementation of the contract is expected to have a positive impact on the company’s operating revenue from 2019 to 2025. It is expected that the annual guaranteed sales commission from 2019 to 2025 will reach 3.525 billion yuan, 4.158 billion yuan, 4.559 billion yuan, 6.288 billion yuan, 6.859 billion yuan, 7.464 billion yuan, 8.148 billion yuan, and the total guaranteed sales commission for 7 years will reach 41 billion yuan.
According to a previous report by the National Business Daily (WeChat ID: NBDNews), Sinofound Securities found that Shanghai airport has a flat efficiency of 1.815 million yuan per square meter per year (flat efficiency refers to the turnover per flat area), far ahead of other listed airports in China. As a comparison, media reports of Apple stores, the ping efficiency is “only” about 400,000 yuan.
In addition, the latest performance forecast released by Shanghai Airport shows a loss of 1.29 billion yuan to 1.21 billion yuan in 2020 and a deduction of non-net profit of -1.406 billion yuan to -1.326 billion yuan.
The duty-free contract calculation method after adjustment, in the view of many institutions, Shanghai airport “sitting to collect rent” high growth expectations of performance reversal, the company’s bargaining power weakened.
CICC downgraded the company to neutral and lowered its target price by 6.7% to 70 yuan, citing a lower-than-expected forecast for Shanghai Airport’s earnings last year and lower-than-expected tax-free revenue over the next five years.
Daiwa, the international bank, downgraded Shanghai Airport to “sell” and lowered its target price by 32 percent to 55 yuan. Goldman Sachs also downgraded Shanghai Airport to ‘sell’ with a price target of 73 yuan, down from a ‘buy’ rating.
Zheng Wu, an analyst of Guotai Junan Transportation, said that Shanghai airport duty-free contract adjustment is lower than expected, Hainan island and online channels have reduced the expected value of duty-free channels at the airport, and the bargaining power of the airport is weakened. The future expansion of T3 will reduce the long-term ROE and lower the target price to 42.51 yuan (68.31 yuan originally). That is to say, in Zheng Wu’s view, compared with the latest Shanghai airport price of 63.99 yuan, the company still has more than 30% room for reduction.
But others are optimistic about the airport. Industrial Securities Research Report believes that the impact of the epidemic does not change the long-term management trend of Shanghai airport, optimistic about the long-term value of international hub airport. After the normalization of the industry, Shanghai Airport is expected to open a new capacity cycle. From the perspective of the development of duty-free business, the new contract makes the airport income significantly enlarged compared with the actual sales situation under the condition of low passenger flow, and the recovery of rent will be faster than the recovery of passenger flow. After entering the recovery stage, the actual daily cost per passenger is reduced. From the perspective of the long-term development of the airport, in the situation of intensified channel competition, it is conducive to enhancing the competitiveness of the airport channel. Maintain prudent overweight rating.
Star fund managers have been hit hard
Prior to the public offering of the four quarters of the fund also disclosed the public offering of the Shanghai airport position. At the end of the fourth quarter of 2020, 59 funds from 27 fund companies had heavy holdings of 48,872,400 shares in Shanghai Airport, according to Wind.
Among them, the star fund manager Zhang Kun headed by the Yi Fangda small selection is the number of holdings of the fund. At the end of the fourth quarter, the fund held 218.01 million shares in Shanghai Airport, up 2.2 million shares from the end of the third quarter. Assuming that the number of shares in the fund does not change, the Shanghai airport two consecutive days of the limit let it float losses of about 320 million yuan.
However, since the third quarter of 2016, E-Fund has been holding medium-cap heavy positions in Shanghai airport for 17 quarters, during which time, Shanghai airport has increased by more than 170%. Looking at the longer time horizon, Zhang Kun’s investment in the process of Shanghai airport is still a good return.