1H20 performance fell short of our expectations. The company announced 1H20 results: operating income of HK$571 million, down 74.3% year on year; loss of HK$443 million, down 205.7% year on year; the company did not pay dividends due to loss in interim results. The company's performance fell short of our expectations, and losses in all core businesses exceeded our expectations, mainly due to the impact of the pandemic. Affected by the epidemic, all of 1H20's core businesses lost: 1) The overall revenue of 1H20's tourist destination business was HK$366 million, -72% year-on-year; loss of HK$180 million. Among them, the revenue of the company's hotels, theme parks, natural attractions and leisure and resort areas was -66%/-82%/-79%/-64%, respectively, with losses of HK$0.71/0.39/0.34/HK$18 billion, respectively. 2) Since January 27, the Ministry of Culture and Tourism has suspended all group outbound travel businesses. 1H20's travel agency and visa-related business revenue was -75% year-on-year, with a loss of 35 million yuan. Up to now, the outbound group travel business has not resumed. 3) Affected by the epidemic, China Automobile's cross-border passenger transport business was completely suspended in the first half of the year. Revenue was -82% year-on-year, with a loss of HK$120 million. Financial analysis: 1) Various businesses have declined sharply, but there are still rigid costs and expenses, resulting in a negative 1H20 comprehensive gross profit. 2) There is a certain degree of rigidity in the period. Expenses during the 1H20 period were -20.5% year-on-year, and the decline was significantly lower than the decline in revenue. 3) The company is in good cash position. As at 1H20, cash and bank balances were HK$2.55 billion, net cash of HK$2.19 billion after deducting various loans of HK$355 million. Development trends The company's business recovery is subject to the overall recovery of the industry. Furthermore, we believe that the recovery of the Hong Kong region is critical, and the company's passenger transportation and visa business are all related to this. We expect the company to still record losses in the second half of the year. At a low point in the industry, the company continues to actively promote the transformation of natural scenic spots to leisure resorts. On July 28, the Detian Waterfall nighttime project “Wonderful Night Detian” was officially put into operation to create a nighttime light show. The China-Vietnam Cross-border Duty Free Street project has also started; the Shapotou Scenic Area continues to advance the construction of the “Star Hotel” project. The company plans to open the first phase at 2H20. The future will enrich leisure and vacation products such as hot springs, bed and breakfasts, hotels, entertainment, and night trips. The company plans to develop tourism, vacation and real estate projects in Jintang County, Sichuan, and obtained the relevant land use rights on May 8. Profit forecast and valuation We expect that the travel industry in Hong Kong will continue to decline sharply in the second half of the year. Net profit for 2020 will be reduced to -603 million HKD, and net profit for 2021 will be reduced by 17.7% to HK$347 million. Current stock prices correspond to 19.1 price-earnings ratios in 2021. Maintaining a neutral rating, considering that the gradual liberalization of travel regulations may boost market expectations, we maintain a target price of HK$1.07, which corresponds to 17.0 times the 2021 price-earnings ratio, and has 11% downside compared to the current stock price. The negative impact of the risk pandemic on the travel industry has exceeded expectations.