Founded in 2008, Tuyi Holdings is an active supplier of outbound tourism products and services in China, focusing on providing Japanese group tours, individual tours, visa agency and tourism supporting services to customers in East China. Customers mainly include B2B customers such as travel companies and online travel agencies and B2C customers such as retail customers. The company sells tourism products and services to them through headquarters, branches and third-party online travel platforms. By the end of 2018, the revenue generated by Japanese tour groups accounted for about 78.4% of the company's revenue. In terms of Japanese outbound tourism revenue, the company ranked fifth in East China, accounting for about 1.2% of the total Japanese tourism revenue of East China outbound travel agencies.
Sino-Thai point of view:
Japan is popular with overseas tourists, but the outbound tourism market is highly competitive: according to Frost Sullivan, Japan is one of the most popular destinations for Chinese outbound tourists. Driven by the Japanese government's measures such as relaxing visas and exempting outbound tourists from consumption tax, and driven by the available income of Chinese tourists and the increase in consumer spending on outbound travel, the number of Chinese outbound tourists to Japan has grown at a compound annual rate of 26.7% over the past five years. Tourists from East China are the largest group of regional tourists to Japan. But China's outbound tourism market is fragmented and competitive. By the end of 2018, there were more than 29000 licensed travel agencies and 4500 outbound travel agencies in China. The revenue of the five major licensed outbound travel agencies accounted for about 18.8% of the total revenue of China's outbound travel agencies in 2018.
In terms of operating performance: in the fiscal year 2016-2018, the company's revenue was 228 million yuan, 168 million yuan and 205 million yuan respectively; gross profit was 47.51 million yuan, 49 million yuan and 49 million yuan; annual profit was 14.96 million yuan, 21.64 million yuan and 7.06 million yuan respectively. The gross profit margin is 20.9%, 29% and 23.9%, while the gross profit margin of the main business sales tour group is only about 10%. The reduction of gross profit margin is mainly due to the reduction of commission charged by third-party Japanese duty-free shops and other retail stores. Over the past three years, more than 78% of the main business income is mainly from the sales of tour groups and local tours, while the income from selling new products is about 6.7%.
Valuation: based on 1 billion shares after the global public offering, the company's market capitalization is HK $5.2-680 million, which is lower than that of its Hong Kong counterparts. In 18 years, the price-to-earnings ratio of the company is about 63.4-82.9 times, which is higher than the industry average; the price-to-book ratio is about 2.26-2.52 times, which is higher than the industry average. In terms of profitability, the 18-year ROE and ROA were 5.9% and 2.9% respectively, slightly higher than the industry average. Combining the company's industry status, performance and valuation, we give it a score of 58, with a rating of "neutral".
Risk hints: (1) market competition risks, (2) any significant adverse changes in the economic, political or social environment related to Japan and natural disasters