2020 results are in line with previous profit warnings
The Company announced 2020 results: revenue of HK$1.97 billion, a year-on-year decrease of 56.1%; net loss to the mother of HK$391 million. Corresponding revenue of HK$1.4 billion to 2H20 was HK$1.4 billion, a year-on-year decrease of 38.2%; net profit of HK$52.694 million was recorded, of which HK$138 million was returned to the 2017 golf club, and HK$183 million from deemed sales of Sindh China Travel for the completion of the vehicle and ship integration project. The results are in line with previous profit warnings.
By business sector, tourist attractions and related business revenue was HK$1,285 million, a year-on-year decrease of 35%. Among them, theme parks/natural and cultural scenic spots (excluding real estate) /tourist attractions supporting service revenue was -69%/-53%/-36%/-40%, respectively, and profit attributable reached -0.81/-0.27/-1.23/+HK$0.81 million; travel agencies, travel documents and related business revenue was -81% to HK$252 million, accounting for a loss of HK$0.19 million; hotel business revenue for the same period -54% To HK$326 million, an attributable loss amounted to HK$97 million. By region, Hong Kong/mainland China (including Macau) /overseas regions had revenue of -75%/-38% and -83%, respectively.
Development trends
Domestic travel continues to heat up. Focus on the recovery of inbound and outbound travel, and wait for core business to resume.
Domestic: As the epidemic control trend improves, vaccination is progressing gradually, and domestic travel continues to heat up. According to Where to Go data, as of March 23, the number of domestic air ticket bookings during the Ching Ming Festival holiday (April 3 to 5) has reached 1.3 times that of the same period in 2019.
According to our observations, family tours account for a large proportion; in addition to tours around the local area, cross-provincial tours are also clearly picking up; leisure vacation travel products are popular. We expect the popularity of the domestic tourism market to increase further during the Ching Ming Festival and May Day holiday.
Overseas: Recently, the epidemic is still repeated in some countries and regions, but at the same time, global vaccinations continue to advance, and government departments are also gradually easing travel restrictions and helping travel resume (for example, the European Union plans to launch a COVID-19 “digital green certificate”, the UK gradually implements the “four-step unblocking” plan, the Chinese version of the “International Travel Health Certificate” WeChat Mini Program officially launched on March 8, etc.). We recommend focusing on global epidemic prevention and control measures, vaccination progress, and the gradual easing of travel restrictions in various countries.
Strengthen the layout of leisure and vacation tours, and sort out and optimize existing assets. 1) In December 2020, it was announced that China Travel Scenic Area, a wholly-owned subsidiary, plans to acquire 34% of Kaiyuan Senbo's shares for 391 million yuan. The latter focuses on short vacation trips for middle- and high-end families. The brand has a good reputation, which helps the company promote the leapfrog development of its tourism real estate business. 2) Inventory projects such as Window to the World, Splendid China, Shapotou Scenic Area, and Detian Scenic Area continue to innovate content and enhance product appeal. Furthermore, it was announced in January 2021 that 51% of the shares in Songshan Company had been sold for 255 million yuan. Since then, the company no longer holds shares in Songshan Company. This move is conducive to stopping losses and returning cash in a timely manner.
Profit forecasting and valuation
Maintain the 2021 profit forecast, consider inventory project sorting and optimization, and raise the 2022 profit forecast by 5% to HK$332 million. Maintaining a neutral rating, the target price was raised by 9% to HK$1.42, corresponding to 24 times the 2022 price-earnings ratio. There is 8% room for improvement from the current stock price.
risks
The negative impact of the epidemic on the travel industry has exceeded expectations for longer than expected.