Mon, Jan 17, 2005 - Page 10 News List

No boost seen for airline stocks

OVERDUE NEWS Analysts said investors expected the deal and had priced it into the market, and that the airlines would have to scramble to sell tickets due to the late date

By Amber Chung  /  STAFF REPORTER

While the landmark agreement on non-stop charter flights for the Lunar New Year holidays has been applauded by both business and political sectors, the breakthrough is expected to give little stimulation to airline stocks, analysts said yesterday -- though it should boost the overall market.

"The one-off charter flights are only a short-term, subject-oriented bullish factor and are not expected to make a substantial contribution to the carriers' earnings per share," Terry Wang (王耀宗), a fund manager at Capital Investment Trust Corp (群益投信), said in a phone interview yesterday.

"The news will not bring much stimulation to the airline stocks," he said.

Another market watcher agreed, saying that investors had already priced in the expected agreement on charter flights reached last weekend.

"It's overdue good news," said George Wu (吳裕良) at Invesco Taiwan Ltd (景順投信) in Taipei.

Wu said the latest agreement came after most China-based Taiwanese businessmen had already booked their flight tickets, which could lead to difficulty for participating airlines in getting business.

Taiwan and China agreed over the weekend on two-way, non-stop charter flights for the Lunar New Year holiday, allowing six Chinese carriers and six Taiwanese airlines, including China Airlines Corp (華航) and Eva Airways Corp (長榮航空) to run a total of 48 flights to carry China-based Taiwanese businesspeople across the strait between January 29 and February 20.

China Airlines, which is scheduled to operate the first flight to Beijing at 4:05am on January 29, will fly between Taipei and Beijing, Shanghai and Guangzou during the holidays.

Eva Airways will fly between Taipei and Beijing and Shanghai.

The breakthrough could be seen as an indication of a thaw in relations between Taiwan and China, which could be good news for the dismal local bourse, Wang said.

"Improving cross-strait relations could help draw more foreign funds and revitalize the stock market," Wang added.

There could be a chance for the benchmark TAIEX to return and stand firm above 6,000 points before the Lunar New Year if daily stock turnover keeps increasing to over NT$70 billion or NT$80 billion to bolster investor momentum, he said.

Last week, China Airlines forecast pretax profit of NT$4.4 billion on revenue of NT$105.6 billion for this year, up from NT$96.1 billion last year. The nation's largest air carrier is expected to issue earnings of NT$1.46 and NT$1.44 per share for last year and this one, according to SinoPac Capital Management Corp (建華投顧).

Eva Airways, which posted sales of NT$75.1 billion for the first eleven months of last year, is expected to issue earnings of NT$1.14 and NT$1.22 per share for last and this year, SinoPac said.

SinoPac predicted a target price of NT$24 for China Airlines and NT$20 for Eva Airways. The two companies closed up by 1.66 percent and 3.27 percent at NT$18.40 and NT$15.80 last Friday.

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