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Old 08-08-2007, 08:51 PM   #1  
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Default Cathay Pacific H1 soars 55 pct, shares hit record

55 percent is incredible! I almost choked on my dinner when I read it, and proceeded to kick myself for not buying the stock. Look at what it says about the cargo side. My Purple friends would do well to think about how other freight carriers are faring while in the midst of the LOA.

From Reuters:
HONG KONG (Reuters) - Cathay Pacific Airways Ltd. <0293.HK>, Asia's No. 3 carrier, posted a slightly better-than-expected 55 percent rise in first-half earnings, pushing its shares to an all-time high, and analysts predicted a strong second half on surging passenger demand.

Analysts expect record full-year earnings as regional travel stays robust, offsetting increasing competition from new entrants and potentially higher jet fuel costs.

Hong Kong's dominant carrier now plans to focus on taking advantage of newly acquired Dragonair -- and its extensive network across mainland China -- and a partnership with Air China <0753.HK>, of which it owns 17.32 percent.

Cathay shares ended 3.1 percent higher at HK$21.90 after hitting a new high of HK$22.20, bringing the stock's gains so far this year to 14 percent.

Merrill Lynch analyst Paul Dewberry lifted his price target on the firm's shares by 5.3 percent to HK$24.50, citing Cathay's leading position in one of Asia's fastest-growing air travel markets and a stock that has underperformed rivals such as Singapore Airlines <SIAL.SI> by about 12 percent.

Apart from the more glamorous passenger-side business, the cargo division also should underpin 2007 earnings, analysts and executives said.

"We are very confident in the long run on the future of cargo," Chief Executive Tony Tyler told reporters. "The fact that this year the markets have been soft shouldn't discourage us."

The airline posted a net profit of HK$2.58 billion (US$330 million) for January-June, versus HK$1.67 billion a year ago.

That beat forecasts of HK$2.05 billion and HK$2.4 billion from two analysts polled by Reuters Estimates.

The airline is now banking on a sustained tourism boom. It announced this week it would add another five Boeing <BA.N> aircraft to its fleet, expanding its coverage.

Analysts expect outbound travel from China, the world's fourth-largest economy, to surge on the back of double-digit economic growth and as Beijing relaxes restrictions.

"The second half of 2007 will be an important one," Chairman Christopher Pratt said.

Cathay carried about 8.5 million passengers in the first half, a 4.1 percent rise from the previous year. Cathay and Dragonair combined carried 10.96 million.

But underscoring the threat of jet fuel costs, Singapore Airlines warned last week that volatile jet fuel prices remained its biggest headache, after posting a 26 percent slide in quarterly earnings.

Cathay said in Wednesday's statement that jet fuel prices had fallen some 1.4 percent in the first half, compared with a year earlier, but it expected them to pick up in the second half.

The carrier intended to hedge about 42 percent of its jet fuel expenses through the rest of the year, executives said.

Investors hoped also for more concrete signs of cooperation with Air China, now Asia's largest airline by market value.

Cathay -- 40 percent-controlled by Hong Kong conglomerate Swire Pacific Ltd. <0019.HK> -- plans to set up a cargo venture with its partner this year.

Air China <601111.SS> said last month that its first-half net profit should jump at least 20 times, from just 45 million yuan ($6 million), partly because of a shift in accounting standards.

And analysts say Cathay could book about HK$1.6 billion in annual profits from its purchase of China-focused Dragonair, which it bought for HK$8.22 billion last year and which became a wholly owned subsidiary in September.

Its full-year net profit is expected to rise roughly a third to HK$5.43 billion, from HK$4.09 billion in 2006, according to the mean forecast of 11 analysts polled by Reuters Estimates.

($1=HK$7.828)
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