Cathay (293 HK) Takes Out Qatar Airway's Stake

• Cathay Pacific Airways (293 HK) has announced plans to acquire Qatar Airways’ 9.57% stake at HK$10.8374/share, or an outlay of HK$6.96bn (~US$890mn).

• Qatar Airways acquired this stake in November 2017 at HK$13.65/share.

• Upon approval from the SFC (mainly granting a MGO waiver), Swire Pacific (19 HK)‘s stake in Cathay increases to 47.69% (from 43.12%); and Air China’s stake to 31.78% (from 28.74%).

The Trade:

• Technically, this buyback is a ~10.5% boost to Cathay’s EPS.

• I do wonder if this development is a long-awaited precursor to Air China taking full control of Cathay.

• I might get some exposure to Cathay here; but it’s not a high conviction trade.

• Elsewhere, Swire Pac’s implied stub & NAV discount are at set-up levels.