UBS: Gives CATHAY PAC AIR (00293) a "buy" rating with a target price of 10.8 Hong Kong dollars.

UBS released a research report stating that it rates CATHAY PAC AIR (00293) as a "buy" and continues to see Cathay as one of the preferred stocks in the Asia-Pacific aviation sector with a target price of HKD 10.8. After the recent repurchase of warrants by CATHAY PAC AIR, the company is also considering repurchasing convertible bonds worth HKD 6.7 billion due in 2026, taking into account market conditions, investor demand, and conditions in the distributor management agreement. Assuming a conversion price of HKD 7.92 per share and full conversion, the dilution of equity may be as high as 12%. UBS expects the market to react positively to Cathay's plan to repurchase convertible bonds. From a fundamental perspective, the bank believes that the market undervalues Cathay's limited fleet expansion, which leads to high ticket prices, estimating that this will increase the group's profit margin in the coming years and strengthen its free cash flow position, potentially further increasing the potential for shareholder cash returns.