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Why this is the best time for investing Cathay Pacific (0293.HK)

As covid-19 cases soar in Hong Kong, the stock price of Cathay Pacific is under great pressure and reach 52-weeks low. It’s recovery plan is still under great uncertainty. However, it may be the best time for investing Cathay Pacific with five reasons.

Top Airline Brand

Cathay Pacific Airways was the 3rd runner-up in SKYTRAX World’s Top 10 Airlines of 2019. Building a successful brand is not a easy task, it takes many years of successful operation and management for winning the recognition from customer.

For investor, a top brand mean competitive advantage and value. A top brand can help the company to distinguish from its competitor. It’s help to maintain the loyalty of customer and allow the company to enjoy a better profit margin.

Acquisition of Hong Kong Express Airways Limited

On 27 March 2019, Cathay Pacific announced an acquisition of Hong Kong Express Airways Limited for a consideration of HK$4.93 billion. This move help Cathay Pacific to access the market of low-cost carrier business. It also helps Cathay Pacific to continuous dominate the Hong Kong aviation business.

To big to fail

On 19 June 2020, Cathay Pacific announced HK$39 billion recapitalization proposal which included the following :

  1. The Preference Shares and Warrants Issue, being a proposed issuance by Cathay Pacific to Aviation 2020 Limited of: (a) the Preference Shares for an aggregate subscription price of HK$19.5 billion; and (b) Warrants to subscribe for Shares with an aggregate exercise price of approximately HK$1.95 billion.
  2. The Rights Issue, being a proposed rights issue of 2,503,355,631 Rights Shares on the basis of seven Rights Shares for every 11 existing Shares held on the Rights Issue Record Date at a Rights Subscription Price of HK$4.68 to raise aggregate proceeds of approximately HK$11.7 billion.
  3. the Bridge Loan, being a committed bridge loan facility to be extended by Aviation2020 Limited to Cathay Pacific in an amount of HK$7.8 billion.

Aviation 2020 Limited, a limited company incorporated in Hong Kong that is wholly owned by the Financial Secretary Incorporated as established under the Financial Secretary Incorporation Ordinance. This mean The Hong Kong Government will indirectly become the shareholder of Cathay Pacific. After the recapitalization, Aviation 2020 Limited is expected to holding 6.08% public share.

As The Hong Kong Government become a significant shareholder of Cathay Pacific, it will provide every resource to make sure Cathay Pacific can survive from this covid-19 crisis.

Three-runway system expansion

In order to meet air traffic growth and maintain competitiveness, Hong Kong International Airport (HKIA) has started its three-runway system expansion. As projected by HKIA, opening of the new north runway will be in 2022 and three-runway system will be completed in 2024.

Upon the completion of the three-runway system, HKIA will be able to serve 30 million additional passengers annually. As a major player in Hong Kong aviation industry, Cathay Pacific can be benefit from this market growth.

The worst is over

Profit warning , recapitalization proposal and significant decline in traffic are all already reflected in the stock price. Once the covid-19 crisis is over and border re-open again, Cathay Pacific will start to soar.


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