1H19 results missed our forecast
CALC announced 1H19 results: Revenue rose 3.9% YoY toHK$1,675mn, and net profit increased 1.5% YoY to HK$312mn（HK$0.461/sh）， missing our forecast by 17% due toslower-than-expected expansion of its own fleet. 1H19 dividendpayout ratio was 49.9%, up 1.5ppt YoY with a DPS of HK$0.23.
Trends to watch
Fleet expansion may be under pressure in 2019 due to delay inaircraft deliveries. In 1H19, its total aircraft fleet rose to 137 （vs. 133by end-2018） with its own fleet maintained at 115 and the fleetmanaged for CAG increasing by 4 to 22. According to the company, sixaircraft were delayed in 1H19, among which three were caused bythe B737 Max grounding and three by the Airbus engine delays. Overall, CALC’s fleet remained competitive with an average fleet ageof 4.1 years, average remaining lease term at 7.8 years and a strongorder book of 227 to be delivered by 2023, according to CALC.
Exit channels have been diversified under its asset-light businessmodel. In 1H19, CALC injected four aircraft into CAG （vs. 18 in FY18）and formed a joint venture to engage in aircraft leasing andinvestment. The company announced that about 12 aircraft wouldexit in 2H19 through a selldown of its portfolio, forming of a jointventure, or a sale to AR, which diversifies its exit channels. And forthe operation of ARI, 15 aircraft were purchased for disassembly in1H19 （vs. 16 in FY18）， and five old aircraft as well as five engines wereleased out through ARI.
Financials and valuation
We lower our 2019 and 2020 earnings forecasts by 11% and 15% toHK$870mn and HK$953mn, as we cut the assumption on thecompany’s own fleet to 130 in 2019 and 163 in 2020.
Stock is trading at 1.3x 2019e and 1.2x 2020e P/B. We maintainOUTPERFORM but lower our TP by 7% to HK$10.07 （1.6x 2019e P/Band 1.5x 2020e P/B） considering the earnings revision, offering 26%upside. Suggest paying attention to its high dividend yield at 8.9% in2019e and high-quality US-dollar cash flow as well as assets.
Risks
Aircraft delivery delays, global economic slowdown, surging oil prices.