Company overview
The company is a well-known outbound tourism products and service provider in China, especially focusing on providing Japanese tour groups and independent travel related products to East China. The company's business mainly includes: designing, developing and selling outbound tour groups and local tour and individual travel products, providing visa application services, providing other tourism supporting products and services, and operating Shizuoka Hotel and Tokyo Hotel owned by the company. According to FY2018 Japanese outbound travel data, the company ranks fifth in East China, with a market share of 1.2%.
FY2016-FY2018, with revenues of 227.83 million yuan, 168.87 million yuan and 205.05 million yuan respectively, declined in 2017 mainly due to the company's cuts to simplify less profitable routes in Australia and New Zealand, and increased revenue due to the launch of South Korea and Southeast Asia routes in 2018; adjusted net profit was 14.96 million yuan, 21.64 million yuan and 22.61 million yuan respectively, CAGR22.93%. From 2016 to 2018, the gross profit margins were 20.9%, 29% and 23.9% respectively, which fluctuated greatly due to business adjustment.
Industry status and prospects
Japan is rich in tourism resources and has become one of the most popular tourist destinations for Chinese outbound tourists. Thanks to the reform measures implemented by the Japanese government (relaxation of tourist visas and reduction of consumption tax for outbound tourists), the number of Chinese outbound visitors to Japan increased from 3.2 million in 2014 to 8.4 million in 2018, CAGR26.7%. In view of the effects of the Tokyo Olympic Games and the improvement of tourism facilities, the number of Chinese tourists to Japan is expected to continue to increase, reaching 18.2 million in 2023.
Advantages and opportunities
Fully benefit from the market opportunities brought about by the rapid growth of China's outbound tourism.
Establish a strong foothold and brand in China, and maintain good business relationship with airlines and other suppliers.
It has a sound sales network in China, including a number of online sales platforms and online travel agencies, which can provide a variety of outbound tourism products and services for end customers in different regions.
Weakness and risk
Major adverse changes in the economic, political or social environment related to Japan, the deterioration of Sino-Japanese diplomatic relations, negative conditions related to the Japanese tourism market and natural disasters in Japan may have a significant adverse impact on the company's business.
Changes in visa application policies of the Chinese and Japanese governments will affect the company's business.
The exchange rate of the yen fluctuates.
Market competition from travel agencies, hotel and flight suppliers, and online travel platforms has intensified.
Investment valuation
Based on the pricing of the prospectus (HK $0.52-HK $0.68) and the adjusted net profit for 2018 (excluding listing expenses, RMB 22.608 million to HK $1.1338), the company has a high valuation with a fully diluted price-to-earnings ratio of 20.3-26.5 times 2018. Due to the small market capitalization of the company, we give IPO a special rating of "4".
