Since January 29, Shanghai Airport fell for two consecutive days before opening the stop on February 3, while closing the same day with a plunge of 7.33%.
On February 3, 2021, Shanghai Airport’s share price continued to sink at the opening, once touching the stop, and by the close of trading its share price reported a 7.33% drop, with the share price falling to 59.30 yuan per share.
The previous two days (Feb. 1 and Feb. 2), Shanghai Airport suffered a continuous one-word stop. February 1 – Feb. 2’s LW list shows that two institutional seats bought about 85 million yuan, and another institutional seat sold 175 million yuan.
According to the closing price of 59.30 yuan per share on Feb. 3, Shanghai Airport’s market value has evaporated about 38 billion yuan in the past three days.
According to a report by the mainland media Interface News on Feb. 3, citing market views, the main reason for Shanghai Airport’s violent share price fluctuations for three consecutive days is its recently disclosed announcement of its 2020 earnings forecast and the newly signed supplemental agreement on the transfer of operating rights of the duty-free store project.
On Jan. 30, Shanghai Airport announced that it expects a loss in net profit attributable to shareholders of the listed company in 2020 compared with the same period of the previous year, with the loss amounting to approximately 1.29 billion yuan to 1.21 billion yuan.
Shanghai Airport also disclosed that due to force majeure events and significant changes in circumstances, the company decided to sign the Supplemental Agreement on the Transfer of Operation Rights of Shanghai Pudong International Airport Duty Free Shop Project (the “Supplemental Agreement”) with Nissha Duty Free (Shanghai) Co. The outbreak of the CCP virus in 2020 should fall under this category of “force majeure”.
According to the new agreement, if the actual international passenger flow in the month ≤ 80% of the average monthly international passenger flow in 2019, Shanghai airport duty-free revenue will be linked to international passenger flow only, instead of the previous link to duty-free sales, and the calculation method will remain unchanged for five years.
This means that the lower limit of revenue under the original agreement has become the upper limit of revenue under the new agreement, and Shanghai Airport has changed from the original state of “no cap on the top, no guarantee on the bottom” to the weak position of “no cap on the top, no guarantee on the bottom”.
The newly released Supplemental Agreement will be effective as of March 1, 2020. According to the agreement, Shanghai airports confirmed revenue of 1.156 billion yuan from duty-free business in 2020, down 77.81 percent year-on-year, a sharp decline from the pre-Epidemic period.
According to mainland media reports, duty-free business is the core business of Shanghai airports. The duty-free store rentals paid to Shanghai Airport from 2017 to 2019 will be RMB 2.555 billion, RMB 3.681 billion and RMB 5.210 billion, accounting for 23.30%, 39.53% and 47.60% of the company’s operating revenue from 2017 to 2019, respectively.
In the face of this sudden “black swan” event, brokerage firms have downgraded Shanghai Airport’s rating and expected share price.
Shanghai Airport was established in 1997, and its main asset was Shanghai Hongqiao Airport. After the asset swap in 2004, Shanghai Pudong Airport became the core asset of the listed company.
Over the past 20 years, Pudong Airport has become one of the three largest international transit hub airports in China, the other two being Baiyun Airport and Capital Airport.
In 2019, Pudong Airport ranked second in China in terms of passenger throughput, with over 50% of the inbound and outbound passengers, and maintained the number one position in terms of both international and regional (Hong Kong, Macau and Taiwan) passengers.
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