Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

On Tuesday after the US market close, China's leading online travel agency <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> reported Q320 results. Net Revenue declined 48% YoY, and Adjusted Operating Income fell 50%.Trip.com's results were largely in-line with guidance and expectations, but we believe the pace of the company's recovery is lagging that of some peers and the industry as a whole, even after adjusting for Trip.com's relatively high exposure to outbound travel, which has collapsed. Trip.com's revenue guidance for Q420 also suggests the pace of its recovery will continue to disappoint in the near-term. We don't see anything to get excited about in Trip.com's Q320 results and Q420 guidance.

On Tuesday after the US market close, China's leading online travel agency Trip.com (TCOM US) reported Q320 results. Net Revenue declined 48% YoY, and Adjusted Operating Income fell 50%.Trip.com's results were largely in-line with guidance and expectations, but we believe the pace of the company's recovery is lagging that of some peers and the industry as a whole, even after adjusting for Trip.com's relatively high exposure to outbound travel, which has collapsed. Trip.com's revenue guidance for Q420 also suggests the pace of its recovery will continue to disappoint in the near-term. We don't see anything to get excited about in Trip.com's Q320 results and Q420 guidance. 

Trip.com Q320 Results Met Guidance, But Q420 Guidance Suggests Very Slow Recovery

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/124/original/BANNER-TOURISM.png?1606332998" class="editor-image img-responsive" data-smartkarma-image-id="174124"></figure></section>Chinese outbound travel activity remained moribund in October, even after another increase in trips to Macau, which eased some travel restrictions in July. Macau's slow recovery suggests it will take many months for outbound activity to normalize once regional restrictions are lifted. China's 'Golden Week' holiday period was a day longer this year, but by most measures domestic air activity in October remained weak versus 2019. Sequential improvement in RPKs and passenger counts in October was just +5% MoM, roughly in-line with normal seasonality, and travelers are still opting for shorter trips. We believe the pace of recovery in domestic travel is moderating. Can the 2021 Lunar New Year holiday rescue China's travel service providers? Without a relaxation of restrictions in key regional markets, another major holiday travel period could be 'lost', in our opinion. We do not believe improving domestic activity can offset 'lost' outbound travel in Q121.We remain negative on Chinese travel demand. We believe the normalization of domestic and especially outbound activitity will take longer than expected -- no 'snap back' scenario, in other words. Furthermore, we believe underlying demand growth was slowing even before Covid19 hit, and it's become clear that domestic travel activity is unlikely to fully offset 'lost' outbound trips.

Chinese outbound travel activity remained moribund in October, even after another increase in trips to Macau, which eased some travel restrictions in July. Macau's slow recovery suggests it will take many months for outbound activity to normalize once regional restrictions are lifted. China's 'Golden Week' holiday period was a day longer this year, but by most measures domestic air activity in October remained weak versus 2019. Sequential improvement in RPKs and passenger counts in October was just +5% MoM, roughly in-line with normal seasonality, and travelers are still opting for shorter trips. We believe the pace of recovery in domestic travel is moderating. Can the 2021 Lunar New Year holiday rescue China's travel service providers? Without a relaxation of restrictions in key regional markets, another major holiday travel period could be 'lost', in our opinion. We do not believe improving domestic activity can offset 'lost' outbound travel in Q121.We remain negative on Chinese travel demand. We believe the normalization of domestic and especially outbound activitity will take longer than expected -- no 'snap back' scenario, in other words. Furthermore, we believe underlying demand growth was slowing even before Covid19 hit, and it's become clear that domestic travel activity is unlikely to fully offset 'lost' outbound trips. 

TRACKING TRAFFIC/Chinese Tourism: Macau's Slog | Golden Week Fails to Shine | LNY 2021 At Risk?

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Alibaba Health Information Tec / Equity Bottom-Up

<ul>
<li>The National Radio and Television Administration forbids juveniles from paying broadcasters.</li>
<li>It was widely rumored that both Alibaba (BABA) and Tencent (700 HK) stopped negotiating the acquisition of iQiyi (IQ).</li>
<li>The National Medical Products Administration formally allow prescription drug to be sold online.</li>
</ul>


The National Radio and Television Administration forbids juveniles from paying broadcasters.
It was widely rumored that both Alibaba (BABA) and Tencent (700 HK) stopped negotiating the acquisition of iQiyi (IQ).
The National Medical Products Administration formally allow prescription drug to be sold online.


China Internet Weekly (30Nov2020): Approve Online Rx Drug, Ban Juveniles from Paying Broadcasters

Chinese online travel agency (OTA) <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng-Elong Holdings Ltd (780 HK)</a> released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least.

Chinese online travel agency (OTA) Tongcheng-Elong Holdings Ltd (780 HK) released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA Trip.com (TCOM US) will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least. 

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

<a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> rallied 14% on Monday in the US on news that <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a>'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (<a href="https://www.smartkarma.com/entities/american-airlines-group-inc" target="_blank" data-smartkarma-citation="entities:3663:1" rel="noopener">American Airlines Group (AAL US)</a>, +15%) and cruise operators (<a href="https://www.smartkarma.com/entities/royal-caribbean-cruises-ltd" target="_blank" data-smartkarma-citation="entities:1629:1" rel="noopener">Royal Caribbean Cruises (RCL US)</a>, +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits.

Trip.com (TCOM US) rallied 14% on Monday in the US on news that Pfizer Inc (PFE US)'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (American Airlines Group (AAL US), +15%) and cruise operators (Royal Caribbean Cruises (RCL US), +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits. 

Trip.com Rallies 14% on Vaccine News. But What's the 'Normal' We'll Return To in 2021?

China

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

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Tongcheng Travel Holdings (780 HK)

Trip.com Q320 Results Met Guidance, But Q420 Guidance Suggests Very Slow Recovery

Trip.com met Q320 net revenue guidance but offered guidance for Q420 that assumes only modest progress toward recovery in the current period.

Tracking Traffic

TRACKING TRAFFIC/Chinese Tourism: Macau's Slog | Golden Week Fails to Shine | LNY 2021 At Risk?

Chinese travel demand remained weak in October, which included the long Golden Week holiday. Poor outbound travel demand is not a surprise at this...

Tracking Traffic

China Internet Weekly (30Nov2020): Approve Online Rx Drug, Ban Juveniles from Paying Broadcasters

The authorities forbid juveniles from paying broadcasters. The Medical Administration allows prescription drug to be sold online.

Ming Lu

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

In Q3, TongCheng-ELong showed growth versus Q2, though revenue and earnings remain lower than a year ago. We expect Trip.com's Q3 results to be far...

Tracking Traffic

Trip.com Rallies 14% on Vaccine News. But What's the 'Normal' We'll Return To in 2021?

An effective vaccine is part of what will get China and the world back to 'normal' travel demand. But even before Covid19 erupted, Chinese travel...

Tracking Traffic

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