No need to panic amid possible lower 1H14 yields for Cathay Pacific

Further downside is limited.

Cathay Pacific's 1H14 results are expected to be slightly in the red given y/y lower yields and a reduced contribution from Air China.

According to a research note from Barclays, however, it sees limited further downside to Cathay Pacific's yields.

This is in line with the fact that 1H14 passenger load factor reached a three-year high of 84%.

Here's more from Barclays:

1H14 may be in the red. We expect yields were marginally lower y/y in 1H14, resulting in a y/y decline in operating profit.

Coupled with a lower y/y contribution from Air China, we expect net profit to be lower y/y in 1H14 as well.

The company had a net profit of HK$24mn in 1H13 (0.05% net margin), leaving 1H14 likely to be in the red.

No need to panic. Even if 1H14 did end up in the red, we believe further downside is limited, given that passenger load factor increased 2.3ppt y/y to 83.6% in 1H14, the highest level in the last three years.

That should underpin the company’s pricing power going forward.

We also think the stock's valuation is attractive at 0.9x 2014E P/B vs its global peers' average of 1.0x.