"Market Values: Beijing Capital International Airport"

Friday, June 8, 2001

Market Values: Beijing Capital International Airport
By Adrian Tan
AsiaWise


If Beijing looks like a cert for the next Olympics, give some thought to
Hong Kong-listed Beijing Capital International Airport (BCIA).

It operates China's main gateway and largest and busiest airport. Beijing
Airport also serves as a major domestic transport hub for locals shunting
between northern and southern regions as well as international passengers
transiting to other cities in China. There are also extensive highway and
railway weaving in and out of Beijing, adding to the airport's hub
attractions.

Passenger throughput was a record 21.7 million in 2000, 23% more than the
combined throughput of Shanghai's Hongqiao and Pudong airports. Cargo and
mail throughput at Beijing also rose 23% last year, to 774,000 tons, second
only to combined traffic at Shanghai's two airports. (Beijing ranked ahead
of each measured separately.)

There is some correlation with China's GDP growth of 10.1% p.a. over the
last decade. According to ING Barings, aircraft movements recorded a CAGR
(compounded annual growth rate) of 12% in that time; passenger volume had a
CAGR of 13%, and freight volume, 19%.

The broker expects BCIA's throughput volume to outperform general economic
growth over the next three years because of rising demand for air services
as the economy continues to recover. China's entry into the WTO is expected
to add more lift, still.

The major customers of BCIA are 40 foreign carriers, 21 domestic airlines
and one each from Hong Kong and Macau. Altogether, they operate 57
international routes and 69 domestic routes.

BCIA's aeronautical business is expected to continue being its major revenue
generator in the next three years, accounting for about 70% of its total
gross revenue. Aeronautical revenue includes passenger charges, aircraft
movement fees, airport fees, ground-handling facilities and services income.

BCIA's non-aeronautical businesses are made up of duty-free and other retail
sales, food, rental income, and advertising and car parking. The company
intends to raise the proportion of non-aeronautical revenue from 29% last
year to 40% over the long term.

BCIA is expected by Barings to register earnings CAGR of 10% for the next
three years on the back of rising throughput driven by growing demand for
air services within China. This financial year core net profit (excluding
forex gains) is projected to jump by 32% and the broker estimates that core
net profit (excluding forex gains) will grow by 21% pa over the next three
years.

BCIA is much smaller than Hong Kong's Chep Lap Kok Airport (CLK). Passenger
capacity is less than two-thirds CLK's. Even when BCIA's Terminal 1 (under
refurbishment) recommences operation and raises passenger capacity to 35
million in two years' time, Beijing will still be 22% below CLK's capacity.

But this does not put it at a competitive disadvantage vis-à-vis CLK since
they serve different markets.

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