The operation fully recovered and successfully turned a loss into a profit
Fosun Travel & Tourism recorded revenue of RMB 17.152 billion per yoy +24% in 2008, corresponding to tourism operating turnover of $181 billion, yoy +19%, surpassing 28% in '19; adjusted EBITDA of $3.73 billion, yoy +59%; net profit to mother of $307 million, turning a loss into a profit. Based on the long term, the company's one-stop high-end vacation destination operation model is scarce. It is actively developing in the direction of asset-light operation. The asset structure continues to improve, and there is plenty of potential for growth. Considering the continued demand for high-end vacations and snow tours, real estate sales are still facing major challenges. The net profit for 24-26 is estimated to be 3.52/440/519 million. Referring to comparable Bloomberg's consistent expectation of 13X EV/EBITDA in 24, considering the real estate boom, sales of supporting real estate are still uncertain, and discounted. Based on 7.5X 24-year EV/EBITDA, the target price is HK$9.20 to maintain “additional holdings”.
Club Med: Focus on upgrading product iterations, volume and price are rising
Benefiting from the rapid growth of the mountain business and the recovery of travel in the Asia-Pacific region, Club Med recorded a turnover of 15.123 billion in '23, yoy +19.2%, or 118.3% in '19. Capacity was +18.5% year-on-year, returning to 98% in 2019, and the global average bed occupancy rate was about 70%, up 3.5 pct from '22; Club Med continued its upgrade strategy, with high-end and exclusive resorts accounting for 97% of capacity, an increase of 9pct over 2019, driving up housing prices. The average daily bed price for 23 years was RMB 1,681.2 (consistent exchange rate), +8.5%/+30.8% compared to 22/19 respectively. The 24-year demand boom continued. As of March 2, 1H24 cumulative reservation volume yoy +14%, room price yoy +8%, and plans to open 4 new resorts throughout the year. As production capacity continues to expand and product portfolio is optimized, revenue generation capacity is expected to be further enhanced.
Atlantis Sanya: Passenger flow recovered rapidly, and profitability continued to increase in 23 years, Atlantis Sanya had a turnover of 1,675 billion, yoy +91%, 6.08 million visitors, yoy +109%, and room occupancy rate of 81.9%. The increase in passenger flow leveraged profit elasticity. Atlantis's gross margin reached 50% in '23, a year-on-year increase of +18.4pct, ranking first in the sub-sector. In '23, upgrade a new experience program, unveil Pink Night, or further boost non-room revenue. In '23, Fanshow had a turnover of 66 million, yoy +163%.
Vacation Management Center and Retreat Club: The new project climbs steadily, increasing traffic value. Taicang Resort has benefited from increased demand for urban vacations and snow tourism, and has climbed rapidly since opening in November 23. Lijiang Resort continues its recovery momentum, with 23 years' turnover of 110 million, yoy +21%. The return tour recorded a turnover of 355 million, yoy +9%. At the end of '23, the number of reunion members exceeded 6.53 million, yoy +17%.
Target price of HK$9.20, “Overweight” rating
Considering that demand for high-end vacations is resilient, and the penetration rate of snow and ice tours has increased, but real estate sales still face major challenges in 24 to 26, we expect net profit of 3.52/440/519 million (24-25 years ago:
3.77/460 million), EBITDA of 40.82/44.14/4.730 billion.
Risk warning: Tourism recovery falls short of expectations, project progress is slow, and real estate project sales are poor.