Credit Suisse upgrades Cathay Pacific to Outperform, hikes target

Cathay Pacific departure gate at Singapore’s Changi AirportCathay Pacific departure gate at Singapore’s Changi Airport

Credit Suisse upgraded Cathay Pacific to Outperform from Neutral on a better growth outlook.

“We expected to see a better 2018 for Cathay Pacific,” it said in a note on Friday. “On the passenger front, we expect to see yield growth turn positive at 2 percent as we see the premium demand trend likely to continue, its main competitor, Chinese airlines, being more disciplined on capacities, and a potential fuel surcharge.”

On the cargo side, Credit Suisse said it expected 3 percent yield growth, given a high base and a likely global trade growth slowdown.

The investment bank added that it expected costs to decline amid a leaner team and a more aligned fleet.

It noted that the carrier reported better-than-expected 2017 results, with recurring net profit of around HK$1.35 billion, mainly as the cargo business beat expectations.

Credit Suisse raised its target price to HK$16.70 from HK$12.40 after raising 2018-19 earnings by 29-35 percent, mainly on stronger passenger yield assumptions.

The stock ended Tuesday down 2.21 percent at HK$14.16.

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