Broker's View

Disney bounce expected for Shanghai aviation, tourism, catering stocks

Analysts predict mainland’s first Disneyland to attract 15 million visitors this year, climbing to 20 million annually once the operation is stabilised

PUBLISHED : Tuesday, 14 June, 2016, 6:49pm
UPDATED : Wednesday, 15 June, 2016, 9:38am

Market watchers are expecting a rally in airport- and airline-related stocks in the run-up to the much-anticipated opening of Shanghai Disneyland later this week.

The high-profile launch on June 16 is expected to give a significant boost to Shanghai’s tourist traffic this summer, with a knock-on, shot in the arm, too, for catering-related and property stocks.

The most-obvious beneficiaries are likely to be Shanghai Airport Authority and China Eastern Airlines, said UBS Wealth Management China strategist Thomas Deng.

While CMS Securities predicts the mainland’s first Disneyland will attract 15 million visitors this year, climbing to 20 million annually once the operation is stabilised. That will translate into 1.6 million

additional passengers for Shanghai Airport Authority this year.

After the opening of second and third phases in future, CMS forecasts 30 to 40 million visits a year, representing an additional 6 to 7 million passengers for Shanghai airports per year in future.

Watch: Disney works its magic on new Shanghai theme park

The airport authority, which runs both Pudong International and Hongqiao International airports, saw passenger volumes grow 10.9 per cent to 99 million in 2015, its best annual growth since the 2010 Shanghai Expo.

UBS research shows Shanghai Airport’s capacity utilisation rate currently starts at 75 per cent, but UBS is expecting a 30-per cent boost to peak-hour traffic, and sustained double-digit growth in international passenger volume, as a result of the Disney launch.

The boost in passenger volume should be most obvious in the first two years
Thomas Deng, UBS Wealth Management China strategist

“The boost in passenger volume should be most obvious in the first two years, but the impact will fade gradually once the higher customer base is set,” Deng said.

Sinolink Securities analyst Su Baoliang says Chinese airlines with strength in Shanghai are likely to benefit most.

China Eastern Airlines Corp, with a dominant 40 per cent share of the city’s passenger market, is sure to be a major Disney winner, said Su.

Smaller budget carrier Juneyao Airlines is also likely to see a spike in business, Hong Kong-based Capital Securities predicts, with its operational headquarters and maintenance function based in Shanghai, and fleets operating out of both Pudong and Hongqiao.

Sinolink Securities says nearly 90 per cent of Juneyao’s business is generated from Shanghai and the carrier recorded a 31.2 per cent rise in passenger numbers to 310 million in the first quarter, with its capacity running at 86.5 per cent, a 0.5 per cent rise.

Those figures compare with 11.2 per cent year annual passenger growth for China Eastern Airlines during the quarter to 21.9 million.

Juneyao’s subsidiary, the 9 Air Company, which focuses on budget passengers, expanded its fleet from five to 10 this year and is likely to turn from a loss last time, to a net 100 million yuan profit, Sinolink said.

UBS’ Deng said that June 16 Disney opening will also have a marked effect on the ecology of some industries.

The park’s test-run in May attracted over a million visitors, despite complaints of expensive food. Visitors were reported to be willing to line up for over four hours for some of its most-popular attractions.

Sinolink Securities also points out the opening will certainly help smooth what can be seasonal volatility in airline passengers volumes during the year.

With highway transportation expected to get an 8 per cent lift as a result of the launch, industries such as like taxis, logistics, and hotels will enjoy long-term stimulus, the brokerage said.

This story has been amended to show that the CMS forecasts for visitors after the opening of the second and third phases refer to future years, not this year.