HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Tongcheng Travel Holdings  / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.</li>
<li>The cooperation with <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.</li>
<li>3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.</li>
</ul>



Tongcheng Travel Holdings (780 HK) is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.
The cooperation with Tencent (700 HK) continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.
3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.


Tongcheng Travel (780 HK): Rides on the Tourism Upswing

Thematic (Sector/Industry)

<ul>
<li>The 2Q23 earnings performance for China's tourism and hospitality stocks provides clear evidence for the sector's operational recovery. This will become even stronger into 2H23.</li>
<li>Forward bookings for <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a>, <a href="https://www.smartkarma.com/entities/h-world-group-ltd" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Grp (1179 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> all point to encouraging underlying demand.</li>
<li>Despite recent strengths in share price, consensus earnings upgrades have made their valuations even cheaper than three months ago.</li>
</ul>


The 2Q23 earnings performance for China's tourism and hospitality stocks provides clear evidence for the sector's operational recovery. This will become even stronger into 2H23.
Forward bookings for Tongcheng Travel (780 HK), Trip.com Group (9961 HK), H World Grp (1179 HK) and Fosun Tourism (1992 HK) all point to encouraging underlying demand.
Despite recent strengths in share price, consensus earnings upgrades have made their valuations even cheaper than three months ago.


China Tourism and Hospitality Industry: Pent-Up Demand Drives Robust Outlook

<ul>
<li>Despite solid 1Q23 result, share price performance for China's tourism and hospitality companies has been unexciting. This is unjustified and we expect a pick-up going forward.</li>
<li>While their earnings multiples are high at 31.0x and 21.6x for FY23 and FY24 respectively, they should be interpreted in the context of impressive FY23-24 average EPS growth of 51.4%.</li>
<li>Anecdotal evidences showed that positive momentum will sustain - <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-limited" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a>, <a href="https://www.smartkarma.com/entities/h-world-group-ltd" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Group (1179 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> will stay as beneficiaries.</li>
</ul>


Despite solid 1Q23 result, share price performance for China's tourism and hospitality companies has been unexciting. This is unjustified and we expect a pick-up going forward.
While their earnings multiples are high at 31.0x and 21.6x for FY23 and FY24 respectively, they should be interpreted in the context of impressive FY23-24 average EPS growth of 51.4%.
Anecdotal evidences showed that positive momentum will sustain - Tongcheng Travel Holdings (780 HK), Trip.com (9961 HK), H World Group (1179 HK) and Fosun Tourism (1992 HK) will stay as beneficiaries.


China Tourism and Hospitality Industry: Set for Stronger Momentum Ahead

<ul>
<li>Despite <a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.</li>
<li>Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.</li>
<li>Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.</li>
</ul>


Despite Shangri-La Asia (69 HK)'s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China's re-opening. More upside to come.
Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China's RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.
Share of China's EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.


Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

<ul>
<li>With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  </li>
<li>Online travel agencies and hotel and resorts operators including <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a>, <a href="https://www.smartkarma.com/entities/huazhu-group-ltd-79e0c5b5-ad55-42ed-b8d2-a2173defd0ea" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Group (1179 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a> are well positioned.</li>
<li>These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. </li>
</ul>


With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  
Online travel agencies and hotel and resorts operators including Tongcheng Travel Holdings (780 HK), H World Group (1179 HK), Trip.com (9961 HK) and Fosun Tourism (1992 HK) are well positioned.
These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. 


China Tourism and Hospitality Industry: A Year of Revenge

Hong Kong

Fosun Tourism Group operates as a leisure focused integrated tourism group. The Company provides resorts management, tourism destinations development, and other related services. Fosun Tourism Group offers its services worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Fosun Tourism (1992 HK)

Tongcheng Travel (780 HK): Rides on the Tourism Upswing

Tongcheng is thriving post-COVID, with a 146.5% growth in adjusted net profit in 3Q23. Cooperation with Tencent is driving momentum and...

Osbert Tang, CFA

China Tourism and Hospitality Industry: Pent-Up Demand Drives Robust Outlook

China's tourism-related stocks showed strong 2Q23 earnings recovery, with forward bookings indicating promising demand. Despite higher share...

Osbert Tang, CFA

China Tourism and Hospitality Industry: Set for Stronger Momentum Ahead

We anticipate sustained earnings strength for China's tourism and hospitality industry following impressive 1Q23 results. This should underpin pick...

Osbert Tang, CFA

Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Shangri-la Asia is an excellent play on recovery of China, where 55% of rooms are located. Its overseas assets will gain from surge in outbound...

Osbert Tang, CFA

China Tourism and Hospitality Industry: A Year of Revenge

We are only in early stage of China's tourism and hospitality recovery, after its re-opening of borders in Jan. We identify Tongcheng, H World,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tongcheng Travel (780 HK): Rides on the Tourism Upswing

​Tongcheng is thriving post-COVID, with a 146.5% growth in adjusted net profit in 3Q23. Cooperation with Tencent is driving momentum and...

Osbert Tang, CFA

China Tourism and Hospitality Industry: Pent-Up Demand Drives Robust Outlook

​China's tourism-related stocks showed strong 2Q23 earnings recovery, with forward bookings indicating promising demand. Despite higher share...

Osbert Tang, CFA

China Tourism and Hospitality Industry: Set for Stronger Momentum Ahead

We anticipate sustained earnings strength for China's tourism and hospitality industry following impressive 1Q23 results. This should underpin pick...

Osbert Tang, CFA

Shangri-La Asia (69 HK): Not yet Fully Reflected China's Comeback

Shangri-la Asia is an excellent play on recovery of China, where 55% of rooms are located. Its overseas assets will gain from surge in outbound...

Osbert Tang, CFA

China Tourism and Hospitality Industry: A Year of Revenge

We are only in early stage of China's tourism and hospitality recovery, after its re-opening of borders in Jan. We identify Tongcheng, H World,...

Osbert Tang, CFA

Tongcheng is thriving post-COVID, with a 146.5% growth in adjusted net profit in 3Q23. Cooperation with Tencent is driving momentum and...

China's tourism-related stocks showed strong 2Q23 earnings recovery, with forward bookings indicating promising demand. Despite higher share...