Swire Pacific: Reinitiating Coverage with HKD 83 Fair Value Estimate and Narrow Moat Rating

We are reinitiating coverage of Swire Pacific with a fair value estimate of HKD 83 per share. We ascribe the conglomerate a narrow moat rating versus a no-moat rating previously. We think Swire Properties, the company’s property business and largest operating segment, benefits from an efficient scale moat source. We believe the Swire Coca-Cola beverages business benefits from an intangible assets moat source stemming from its long-term symbiotic relationship with Coca-Cola for the exclusive bottling rights in regions where it operates. We think the Cathay Pacific airline business does not benefit from an economic moat, as the industry is highly competitive and capital-intensive in nature. Nonetheless, the business environment for Hong Kong Aircraft Engineering Co. and Cathay Pacific has started to stabilize after the pandemic.