Bank of America Merrill Lynch published a report that lowered the target price of Shangri-La (00069.HK) from 13.2 yuan to 13 yuan, as the bank lowered its EBITDA forecast for this year and next two years by 5% and 2%, respectively. At the same time, it lowered the group's average rental room revenue growth forecast for this year, from 2% to 0%, and next year from 2% to 1%.

Shangri-La opened 3 new hotels in the first half of the year, and recorded pre-opening expenses of 6 million US dollars. New hotels opened in the Mainland last year and this year recorded a total initial loss of US$13.4 million in the first half of the year. It is expected that 5 more new hotels will be opened at Shangri-La in the second half of the year. Bank of America Merrill Lynch believes that the increase in pre-opening expenses and initial losses will drag down the Group's profits.

Since the beginning of the year, Shangri-La's stock price has declined by 21%, an increase of 4.5% compared to the Hang Seng Index. I believe the stock price generally reflects the group's weak earnings. However, Bank of America Merrill Lynch believes that Shangri-La has no catalyst in the short term, and that its valuation is at a reasonable level, so it maintains its “neutral” rating.