The current situation of the company
On December 8, the Hong Kong government extended the mandatory quarantine measures to March 31, 2021, which had been planned to stop on December 31, 2020.
Comment
The epidemic continues in Hong Kong and the company's business shuts down. 1) the epidemic continues to spread in Hong Kong and has not been effectively controlled. The Hong Kong government extended the compulsory quarantine measures for another three months on December 8 to March 31, 2021. 2) at present, the tourism industry in Hong Kong is still in a state of suspension, with the passenger traffic of Chinese mainland to Hong Kong falling by more than 95% in November compared with the same period last year.
Most of the company's tourist passenger transport business, visa business, and hotel business are carried out in Hong Kong, which has a great negative impact. 3) Macao resumed the tourist endorsement for mainland residents to Macao on September 23, and the number of mainland visitors to Macao in October was-73% year-on-year, narrowing the decline compared with other overseas destinations. However, due to the high correlation among visas, travel agencies and individual travelers in Hong Kong and Macao, we expect the company's business in Macao to recover slowly and sort out its existing assets. 1) in October, the company announced the sale of its 51% stake in Songshan Company by public listing, and will no longer hold any shares in Songshan after the sale. Songshan Company mainly develops, manages and operates Songshan Scenic spot, which recorded a loss in 1H20 due to the epidemic. 2) historically, the profitability of Songshan Scenic spot has been limited, and the purpose of the sale is to optimize the asset portfolio of internal natural and cultural scenic spots and improve cash return and asset turnover. 3) in addition, the company is also actively promoting asset revitalization business in Hong Kong.
1) the recovery of the domestic tourism market shows obvious structural characteristics, and the recovery of high-end tourism is faster. The company's scenic spots such as window of the World, Beautiful China and Detian Falls belong to traditional natural and cultural scenic spots. We expect the recovery rate to be slower than that of the industry at present, but Anji club Med, Haiquan Bay and other leisure and holiday scenic spots recover better. 2) Vaccine research and development continues. On December 8, US regulators confirmed that the effectiveness of the Swiss / BioNTech vaccine could reach 95%. This week (December 7-13), the UK has launched a large-scale vaccination program; on December 9, Canada approved the use of the COVID-19 vaccine. 3) We expect that it will still take time for cross-border travel around the world to recover.
Valuation proposal
Considering that the recovery of tourism business in Hong Kong is slower than we had expected, the net profit in 2020 will be reduced to-769 million yuan, and the net profit in 2021 will be lowered by-18% to 284 million yuan. The current share price corresponds to 21 times 2021 P / E ratio and maintains a neutral rating. Considering that the market has digested the pessimistic expectation of a slow recovery of cross-border tourism, we maintain the target price of HK $1.07, corresponding to 21 times 2021 P / E ratio. There is 0.3% downside compared with the current share price.
Risk.
The negative impact of the epidemic on the tourism industry exceeded expectations.