1H23 performance exceeded our previous expectations
The company announced 1H23 results: revenue of 8.9 billion yuan, +39% year on year; net profit from return to mother of 4.7 billion yuan, reversing losses year on year. The performance exceeded our expectations, mainly due to non-recurring revenue (including $280 million in disposal and sale-leaseback resort revenue of 280 million yuan, disposal of Casa Cook and Cook's Club business revenue of 50 million yuan, and net exchange revenue of 0.7 billion yuan). 1H23 adjusted EBITDA of 2.3 billion yuan, +92.4% year-on-year. Interest-bearing bank and other loans amounted to $12.2 billion as of the end of June 2023 ($12 billion at the end of 2022).
Club Med: 1H23's turnover was +32% year-on-year to 7.939 billion yuan, compared to 1H19 +20%. Among them, America/Europe, Africa, Middle East/Asia Pacific was 1H19 +65%/+13%/-7%, and mainland China's turnover was 1H19 -17%. The capacity of 1H23 recovered to 99% in '19, the global average occupancy rate was about 62.4% (compared to +3.3ppt/compared to 19-2.7ppt), and the average daily bed price was +11%, and +32% compared to '19. 1H23 adjusted EBITDA +71% year-on-year to 1,987 billion yuan.
Sanya Atlantis: 1H23's turnover was +82.2% year-on-year to 887 million yuan. The average daily room rate was -2.9% year-on-year, and the occupancy rate was +40.1ppt to 86.2% year-on-year. The adjusted EBITDA was +122.9% to 461 million yuan, and the EBITDA profit margin was +9.5 ppt to 52.0% year over year.
Other businesses: 1H23 Taicang/Lijiang delivered 145/13 property units, with property sales and construction service revenue +67% to 360 million yuan; Lijiang Resort 1H23's turnover was +122% to 0.4 billion yuan. Fuyoukai strategically reduced less profitable businesses, with revenue of -12.3% year-on-year.
Development trends
Follow the restoration of Club Med and the development of new villages in Asia Pacific. As of 2023/8/5, the cumulative booking volume of 2H23 (consistent exchange rate turnover) was +6% compared to the same period in '22 and +21% over the same period in '19; the cumulative number of bookings recorded for 1H24 was +27% compared to the same period in '22 and +54% over the same period in '21. Looking forward to the future, we think the Asia-Pacific region is expected to benefit from the continued recovery of China's outbound travel, or take over Europe and the US and become a region with a high slope of recovery. In terms of expansion, the company plans to open 4 new resorts in 2H23 (2 in a series of cities located in China) and 17 new resorts in 23-25. It is expected that 2025 will increase capacity by more than 20% compared to 2022.
Yate's turnover in July was under pressure, focusing on the increase in non-housing income; focus on market feedback on the Taicang project's opening in the second half of the year. Affected by the general consumption environment and pressure on tourism consumption in Hainan, Yate's turnover in July was -10.8% to 192 million yuan. Among them, the average room occupancy rate was -3.9 ppt to 88.3% year on year, and the average daily room rate was -9.7% to 3,007 yuan. The company announcement indicates that in the future, Yate will continue to upgrade the supply of non-housing content and increase non-housing revenue to expand the revenue limit. In addition, the company plans to open the Taicang project's indoor ski resorts, resorts, and shopping streets in the second half of the year. We are paying attention to subsequent market feedback.
Profit forecasting and valuation
Carefully consider property sales and the resumption of pressure on YATE, lower the 23-year revenue forecast by 5% to 16.3 billion yuan, but consider non-recurring revenue, raise the 23-year EBITDA forecast by 10% to $40,000, and raise the 23-year EBITDA forecast by 10% to 3.7 billion yuan; carefully consider property sales, lower the 24-year net profit forecast by 14% to 640 million yuan, and maintain the 24-year EBITDA forecast. It currently corresponds to 24 years and 7 times EV/EBITDA. Maintaining an outperforming industry rating, considering a correction in sector valuations, the target price was lowered by 18% to HK$12 (corresponding to 8 times the 24-year EV/EBITDA), with 49% upside.
risks
The recovery of Club Med and Atlantis fell short of expectations; new project development and climbing fell short of expectations.