Company trends
Recent situation of the company
Recently, due to novel coronavirus variation and repeated influence, overseas and domestic travel control is still uncertain, but long-term optimistic about Club Med capacity recovery and expansion and upgrading, as well as Sanya Atlantis growth prospects.
Comment
Pay attention to the uncertainty of travel control under novel coronavirus's variation. Under the influence of the novel coronavirus O'Micron variant strain since late November, Japan has suspended the new entry of foreigners from all countries and regions since 00:00 on November 30. the South Korean government plans to tighten domestic epidemic prevention measures. the United States, France, Britain, Canada and other countries have strengthened entry epidemic prevention measures. the time for Australia to reopen its international border has been postponed from December 1 to December 15. Hong Kong has gradually tightened boarding and quarantine requirements for people arriving in areas with new cases of O'Micron mutant infection, at the same time, continue to promote preparations for customs clearance between the two places: the Hong Kong Health Code ("Hong Kong Kang Code") has opened online applications since 9: 00 on December 10; on December 14, relevant government teams of the Hong Kong Special Administrative region went to Shenzhen to hold a docking meeting with representatives of Guangdong Province to discuss customs clearance arrangements. 5.
Long-term optimistic about Club Med capacity recovery and expansion and upgrading. We estimate that 4Q21 production capacity is higher than the pre-epidemic recovery than 3Q21's 71.9% month-on-month, and the remaining gap is mainly due to the fact that some Asia-Pacific resorts outside China are still closed due to the local epidemic and major tourist sources such as China, Japan and South Korea. With the gradual lifting of entry and exit restrictions in Northeast Asian countries, the company plans to restart some Asia-Pacific resorts in 2Q22. The company plans to open 16 new Club Med resorts between 2021 and 2023. Since the beginning of this year, resorts in Seychelles, Lijiang and Quebec have opened, while Changbai Mountain Resort plans to open in winter. In addition, with the expiration of leases at some low-star resorts, the opening of new high-star resorts and the upgrading of existing capacity (the company plans to complete the renovation of 12 existing resorts by 1H24), we expect the average bed price to continue to rise.
Under the prevention and control of the domestic epidemic, the passenger flow in Hainan during the peak tourist season may be under pressure; Atlantis is expected to continue to outperform the industry. As of 15:00 on December 15, there were 7 high-risk areas and 47 medium-risk areas in China, covering Inner Mongolia, Heilongjiang, Shanghai, Zhejiang, Guangdong and Shaanxi. On December 8, the Shanghai Health and Health Commission proposed that New Year's Day "do not leave Shanghai without necessity" during the Spring Festival; at the same time, we expect that under domestic travel control during the Winter Olympic Games, Sanya, Hainan, as a national cross-provincial tourist destination, will be under pressure from the end of the year to the peak tourist season of 1Q22. At the same time, we believe that the operating performance of Atlantis as a landmark holiday product in Sanya is expected to continue to outperform its peers, and there is still much room for improvement in operation and non-housing revenue in the long run.
Valuation and suggestion
Taking into account the uncertainty of travel control under the repeated epidemic, the related expenses at the beginning of the opening of the Lijiang project and the cost of new business development, we lowered our profit forecast for 2021 from a net loss of 2.3 billion yuan to a net loss of 2.47 billion yuan. the profit forecast for 2022 will be reduced by 42% from 620 million yuan to 360 million yuan. The current share price corresponds to 7 times the 2022 EV/EBITDA. Based on the bullish medium-and long-term Club Med recovery and growth prospects of Sanya Atlantis, it maintained its outperforming industry rating and revised its target price downwards to HK $13.50, corresponding to eight times 2022 EV/EBITDA, which has 47 per cent upside from the current share price.
Risk
The impact of the epidemic exceeded expectations, and the construction and development of new projects fell short of expectations.