FOLIDAY, Fullshare Holdings and other "Internet+travel" low-lying stocks have promising prospects
Mar 21, 2019
7 minute read
(21 March 2019, Nan Jing) Benefiting from the policy development opportunities of domestic tourism industry, the US-listed Tuniu (TOUR) and Ctrip (CTRP) both announced their dazzling 2018 financial results, and the share prices of the two companies also rose sharply in line with the trend. However, also benefited from the domestic tourism market policy favorable, shares of Fullshare Holdings (0607.HK), FOLIDAY (1992.HK) and other companies who have listed in Hong Kong shares of the Internet travel sector have not yet started soaring, so a number of research institutions have given a “buy” rating.
Tuniu and Ctrip surges after earnings debut
On 28 February, US-listed Tuniu released its annual results for the 2018 financial year, showing a non-US GAAP net profit of RMB10.9 million (US$1.6 million) for 2018, compared to a non-US GAAP net loss of RMB531.1 million in 2017. The financial results also showed that Tuniu stemmed from growth in group tour revenue, with all-inclusive tour product revenue of RMB1.8 billion (US$266.3 million) in 2018, up 15.2% year-on-year. Meanwhile, Tuniu’s costs also continued to shrink, with operating expenses of RMB1.5 billion (US$221.7 million) in 2018, which decreases 25.7% year-on-year. On the secondary market, Tuniu’s US share price has risen by 9% since February this year.
On Tuniu’s heel, Ctrip also released its 2018 financial results on 4 March, with the company’s full-year 2018 net operating income at RMB31 billion. Net operating income for the fourth quarter of 2018 was RMB7.6 billion, an increase of 22% year-on-year. On the revenue side, excluding equity compensation expenses and gains and losses from changes in fair value of equity-type available-for-sale financial assets, net profit attributable to Ctrip shareholders was RMB5.5 billion, an increase of nearly 40% year-on-year. Benefiting from the growth in earnings, Ctrip’s share price has increased significantly by more than 20% since March this year.
“Internet + tourism” frequently encouraged by favorable policies
In terms of policy, on March 5, China’s government work report emphasized tax cuts and revenue increases, accelerating the supply of quality products and services, and developing and growing the tourism industry. According to the Ministry of Tourism and Culture, the number of domestic tourists reached 5.539 billion in 2018, an increase of 10.8% year-on-year. Domestic tourism revenue was RMB5.13 trillion, up 12.3 per cent year-on-year. Overall, the growth rate of domestic tourism numbers remained high in 2018. 2019 Spring Festival holiday tourism data showed that the country took 415 million visitors, 7.6% higher than a year before; achieving tourism revenue of 513.9 billion yuan, which 8.2% higher than that of the 2018, a positive growth.
For this policy dividend, Huatai Securities research report proposed: “VAT decline is favorable to decline of the end retail price, also help boost the willingness of consumption, the tourism sector is expected to benefited, and it is recommended to focus on duty-free shopping, peripheral leisure travel, proximity oversea travel.”
In addition, in terms of outbound tourism, the number of Chinese citizens travelling out of China in 2018 was 149.72 million, an increase of 14.7% year-on-year, the highest growth rate in the past five years, and the outbound tourism market is prosperous. In terms of international airline civil aviation, the number of civil aviation passengers on international routes in China reached 55.425 million in 2018, an increase of 14.8% year-on-year.
The China Tourism Research Institute and Ctrip also jointly released the 2018 Chinese Tourist Outbound Travel Big Data Report, which showed that in 2018, China’s outbound tourism continued to heat up and steadily ranked first in the world’s outbound tourism.
According to an analysis by Dai Bin, president of the China Tourism Research Institute, China’s outbound market has continued to grow at a rate of more than 20% over the past 10 years, becoming the world’s largest source country for outbound tourism and tourism consumption expenditure. Outbound travel has become part of our daily life. Customized travel will become mature future, and personalized demand will be further accentuated. It is expected that China’s outbound tourism market will maintain double-digit growth in 2019 and the period ahead.
The value of “Internet+travel” stocks is highlighted
In contrast, the shares of FOLIDAY and Fullshare Holdings, which are also benefiting from favourable domestic industry policies, have not yet been launched in the Hong Kong stock market.
FOLIDAY (1992.HK) is a leading global integrated travel group that focuses on the travel and business sectors, creating a complete ecological loop around the concept of “high-end, tailored, family-centric travel and leisure experiences” to serve its target customers in all aspects of leisure and holiday: based on the FOLIDAY platform and mobile app, the company offers travel and leisure solutions including core resources such as Club Med resorts, destinations (Atlantis Sanya, Ebenezer) and scenario-based service offerings (Pan Show and Mini Camp).
FOLIDAY has not yet announced its 2018 financial results, but a number of research institutions, including Essence International Securities(Hong Kong), CLSA and CITIC Capital, have given the company a “buy” rating for the first time. Among them, CITIC Capital believes that FOLIDAY is an extremely rare leading leisure travel and holiday target, and its global layout has formed a strong competitive edge-the operation of the stock projects is improving + the future projects are well positioned + the use of cash “strong” model.
Fullshare Holdings (0607.HK), on the other hand, starts from industrial platforms and focuses on the investment and operation of resources in the health travel industry. By digging resource in hotels, scenic destinations, health services, health toppings, new businesses, etc., platform end (B2B and B2C travel platforms), brand and media marketing end, finance and In recent years, Fullshare Holdings has been actively involved in the development of the tourism industry and its business ecosystem. It has also established a complete industrial hierarchy, business synergy and transaction logic.
In recent years, Fullshare Holdings has been actively responding to the national grand health development strategy and committed to improving people’s quality of life and living standards, and vigorously developed the health tourism business. In November 2017, Fullshare Holdings acquired a stake in Tuniu; in December, the company proposed to purchase an investment fund to acquire a stake in Shanghai Joyu. Meanwhile, Fullshare Holdings has also cooperated with internet platforms such as Meituan, ly.com, Ctrip and Octopus.
It is worth noting that both Tuniu and Ctrip are listed on the US stock exchange, the two enterprises that Fullshare holds a positive attitude towards. Both companies have achieved consecutive share price increases following the release of their 2018 financial results.
According to Fullshare Holdings’ plan, the company will eventually form a “investment + finance + supply chain + platform + destinations + products + operations” health tourism chain, encompassing the major segments of tourism and driving the entire tourism industry forward.
In regard to tourism market, Fullshare Holdings said that this industry is a green economy as well as a pleasure economy. As a sunrise industry, tourism is highly growing that can link these six categories, including food, accommodation, transportation, travel, shopping and entertainment.
Fullshare Holdings has already partnered with quality destinations in Hainan and is working with leading travel agencies in East China and beyond. We shall noticed that the construction of Hainan’s free trade zone has accelerated significantly following the publication of the State Council’s Notice on the Issuance of the Overall Plan of the China (Hainan) Free Trade Pilot Zone, with 2020 being the first key point mentioned in the plan and more policy to be intensively implemented.
“Tourism is gradually becoming an indicator of a better life for everyone and an immediate need to obtain a sense of well-being, and in the government work report, tourism data is also covered for the first time.” A relevant researcher from CITIC Capital said, “Benefiting from the policy, tourism will see huge development opportunities in the future.” (According to the Huanqiu.com)