HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Travel International Investment Hong Kong / Equity Bottom-Up

China Travel International Investment Hong Kong

We regard <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment Hong Kong (308 HK)</a> (CTII) as an alternative play on the encouraging economic growth outlook at Qianhai and Hengqin, given its presence in the nearby cities of Shenzhen and Zhuhai with theme parks and leisure resorts. We also see its profitability to sustain improvement in 2H21, after a very successful narrow-down of losses in 1H21.CTII has made continuous efforts in optimising its assets by disposing of underperforming ones and acquiring value-enhancing ones. We expect such strategy will become fruitful in 2H21 with the removal of losses at Songshan Scenic Spot and travel agency and document business, and the addition of profit from Hangzhou New Century Senbo. CTII is a laggard in the tourism space with a cheap 0.4x 12-month forward P/B. Its net cash of HK$1.14/share now almost equals to its share price, meaning that the market is valuing its businesses at zero value - this is just overly conservative.

We regard China Travel International Investment Hong Kong (308 HK) (CTII) as an alternative play on the encouraging economic growth outlook at Qianhai and Hengqin, given its presence in the nearby cities of Shenzhen and Zhuhai with theme parks and leisure resorts. We also see its profitability to sustain improvement in 2H21, after a very successful narrow-down of losses in 1H21.CTII has made continuous efforts in optimising its assets by disposing of underperforming ones and acquiring value-enhancing ones. We expect such strategy will become fruitful in 2H21 with the removal of losses at Songshan Scenic Spot and travel agency and document business, and the addition of profit from Hangzhou New Century Senbo. CTII is a laggard in the tourism space with a cheap 0.4x 12-month forward P/B. Its net cash of HK$1.14/share now almost equals to its share price, meaning that the market is valuing its businesses at zero value - this is just overly conservative.  

China Travel Intl Inv (308 HK): Alternative Play on Supportive Policies to Qianhai and Hengqin?

<a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment Hong Kong (308 HK)</a> (CTII) should see a good recovery in FY21, riding on the solid travel business as supported by the release of pent-up demand. Based on the anecdotal data for the Labour Day holidays, we think its tourist attractions segment, with presence spanning across many important travel spots in China, will likely lead a turnaround in 1H21, both in terms of HoH and YoY comparison.We also envisage that its hotel operations and passenger transportation will trim losses in FY21, as global vaccination rates increase and cross-border travel restrictions are gradually removed. Its hotels in Hong Kong have participated in staycation program and involved as quarantine hotel, which will both improve the cash flow of this business segment. We note that net cash amounted to 34.3% of CTII's current share price, providing ample room to comfortably move ahead on the recovery.

China Travel International Investment Hong Kong (308 HK) (CTII) should see a good recovery in FY21, riding on the solid travel business as supported by the release of pent-up demand. Based on the anecdotal data for the Labour Day holidays, we think its tourist attractions segment, with presence spanning across many important travel spots in China, will likely lead a turnaround in 1H21, both in terms of HoH and YoY comparison.We also envisage that its hotel operations and passenger transportation will trim losses in FY21, as global vaccination rates increase and cross-border travel restrictions are gradually removed. Its hotels in Hong Kong have participated in staycation program and involved as quarantine hotel, which will both improve the cash flow of this business segment. We note that net cash amounted to 34.3% of CTII's current share price, providing ample room to comfortably move ahead on the recovery. 

China Travel Intl Inv (308 HK): Poised for a Sustained Recovery

Into 2021, share price of <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment Hong Kong (308 HK)</a> (CTII) has started to pick up on improving fundamentals, but we expect more upside to come. The profit warning for FY20 is actually a "positive profit alert" for 2H20 as it showed that CTII has potentially turned around positively both on a HoH and YoY basis.Solid tourist traffic in its theme parks in Shenzhen during Chinese New Year holidays, value-enhancing acquisition of tourism business in Hangzhou and improving COVID-19 situation and vaccinations in Hong Kong all support sustained recovery in FY21. Meanwhile, disposal of non-core loss-making asset in Jan also provides part of the fund it needed for the Hangzhou acquisition, maintaining its highly solid balance sheet with net cash estimated at over 23% of the market cap.

Into 2021, share price of China Travel International Investment Hong Kong (308 HK) (CTII) has started to pick up on improving fundamentals, but we expect more upside to come. The profit warning for FY20 is actually a "positive profit alert" for 2H20 as it showed that CTII has potentially turned around positively both on a HoH and YoY basis.Solid tourist traffic in its theme parks in Shenzhen during Chinese New Year holidays, value-enhancing acquisition of tourism business in Hangzhou and improving COVID-19 situation and vaccinations in Hong Kong all support sustained recovery in FY21. Meanwhile, disposal of non-core loss-making asset in Jan also provides part of the fund it needed for the Hangzhou acquisition, maintaining its highly solid balance sheet with net cash estimated at over 23% of the market cap.

China Travel Intl Inv (308 HK): Market Discovering This Recovery Play but This Is Just the Beginning

We think <a href="https://www.smartkarma.com/entities/china-travel-intl-inv-hk" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel Intl Inv Hk (308 HK)</a> (CTII) is an interesting name misunderstood, overlooked and under-researched by the market. As such, this will potentially provide promising upside return given its undemanding valuation relative to the travel agency and package tour peers. CTII is not a travel agency and instead it is a major operator of tourist attractions in China that is well positioned to benefit from the recovery of the domestic travel market. Trading at just 0.4x P/B and with net cash equals to 36% of current share price, CTII is also a potential candidate for privatisation by its ultimate parent China Tourism Group.

We think China Travel Intl Inv Hk (308 HK) (CTII) is an interesting name misunderstood, overlooked and under-researched by the market. As such, this will potentially provide promising upside return given its undemanding valuation relative to the travel agency and package tour peers. CTII is not a travel agency and instead it is a major operator of tourist attractions in China that is well positioned to benefit from the recovery of the domestic travel market. Trading at just 0.4x P/B and with net cash equals to 36% of current share price, CTII is also a potential candidate for privatisation by its ultimate parent China Tourism Group.   

China Travel Intl Inv (308 HK): Recovery Play Overlooked by the Market + Privatisation Possibility

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

China Overseas Land & Investment / Equity Bottom-Up

Carrie Lam has announced that the government will withdraw the extradition bill, a move that is expected to cheer the stock market. In this report, we have identified a couple of beaten-down value names that could participate in the short term rally especially those in the real estate and tourism-related sector. Some of the names mentioned also pay decent yield ranging from 2-7%.

Carrie Lam has announced that the government will withdraw the extradition bill, a move that is expected to cheer the stock market. In this report, we have identified a couple of beaten-down value names that could participate in the short term rally especially those in the real estate and tourism-related sector. Some of the names mentioned also pay decent yield ranging from 2-7%. 

Hong Kong

China Travel International Investment Hong Kong Limited, through its subsidiaries, operates tourist attractions, golf clubs, hotels, and other travel related activities.  The Company also provides passenger transportation as well as freight forwarding and cargo services.

China Travel International Investment Hong Kong (308 HK)

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China Travel International Investment Hong Kong (308 HK)

China Travel Intl Inv (308 HK): Alternative Play on Supportive Policies to Qianhai and Hengqin?

CTII has good presence in Shenzhen and Zhuhai, and we see sustained recovery into 2H21. Its asset optimisation strategy will start to bear fruit as...

Osbert Tang, CFA

China Travel Intl Inv (308 HK): Poised for a Sustained Recovery

Good Labour Day holidays tourism traffic is supportive for the sustained recovery of CTII's tourist attraction segment. The growth in vaccination...

Osbert Tang, CFA

China Travel Intl Inv (308 HK): Market Discovering This Recovery Play but This Is Just the Beginning

CTII posted solid evidence for a YoY and HoH turnaround in 2H20; and with good CNY performance for its China tourist attractions and improving...

Osbert Tang, CFA

China Travel Intl Inv (308 HK): Recovery Play Overlooked by the Market + Privatisation Possibility

China Travel Intl Inv is an interesting recovery play yet to be full appreciated by the market. Its depressed valuation and exposure to the...

Osbert Tang, CFA

Hong Kong Value Names: Short Term Rally

Carrie Lam has announced that the government will withdraw the extradition bill, a move that is expected to cheer the stock market. In this report,...

Henry Soediarko

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