Hong Kong company reporting season

Theme park operator China Travel sees 39pc rise in profit as tourist numbers and spending continue to soar

Strong first half leaves company on track to beat full-year profit estimates

PUBLISHED : Wednesday, 30 August, 2017, 12:32pm
UPDATED : Wednesday, 30 August, 2017, 10:27pm

A Hong Kong-listed company focused particularly on hotel and leisure industry investment in mainland China has reported a robust 39 per cent rise in net half-time profit, driven by rising numbers of tourists visiting its properties and theme parks.

China Travel International Investment Hong Kong Limited, which also operates whole leisure resorts, registered net profit of HK$375 million (US$47.9 million), or 6.88 HK cents a share.

The results leaves the company on track to beat its full-year profit estimate of HK$548 million, polled by Thomson Reuters on seven analysts.

“The domestic tourism industry maintained double-digit growth, compared with a national 6.9 per cent rise in gross domestic product in the first half of the year,” said its chairman Zhang Fengchun.

China Travel enjoyed strong 38 per cent growth in income, especially at its core tourist attractions to HK$311 million, Zhang said, including its “Window of the World” theme park in Shenzhen.

The firm will pay a 3 HK cent dividend per share, up from last year’s 2 HK cents per share.

The domestic tourism industry maintained double-digit growth, compared with a national 6.9 per cent rise in gross domestic product in the first half of the year
China Travel chairman Zhang Fengchun

The company said it is considering a number of proposals to optimise asset structure, including spinning off some of its mainland attractions located at scenic spots for listing on the A-share market.

“As mainland regulations do not allow listing of ticket sales [operations], to realise the spin-off, we may need to reorganise certain transport assets and auxiliary businesses, such as marketing and sales,” said deputy general manager Tao Xiaobin.

In addition, China Travel is planning to sell its three-storey shop in Mong Kok, Kowloon. “While the book value is less than HK$100 million, the market price may reach HK$1 billion. The sale can improve the return on assets,” said Tao.

The group plans to convert its warehouse property in Hung Hom into a hotel or serviced apartments.

The company owns five hotels in Hong Kong and Macau, including the Metropark Hotel in Kowloon, and two in mainland China, which recorded a 58 per cent rise in profit to HK$61 million in the half. Their total revenue rose 29 per cent to HK$2.35 billion in the period.

The company also booked a HK$29 million gain from the sale of its Yangzhou Metropark Hotel in Jiangsu Province, in February.

The company manages 12 theme parks, natural scenic spots, leisure resorts in the mainland, and has equity stakes in all but four, which attracted some 5.2 million visitors, contributing profit of HK$68 million, up 4 per cent from last year.

The “Window of the World” park enjoyed a massive 133 per cent surge in visitor numbers generated through e-commerce, with that for revenue increasing 70 per cent. After a strong marketing push, the venue also increased group bookings by nearly a quarter.

Zhang said he is now hopeful of even more robust growth to come, as a result of China’s flagship economic programme, The “Belt and Road Initiative”, adding his firm will explore opportunities along the ancient Silk Road trading routes, which present rich pickings for tourism.

He admitted, however, he expects stiffer competition in the Chinese travel industry though the average consumer finds more money in their pockets to spend on leisure pursuits.

“Leading private and foreign-owned travel companies are accelerating their business expansions [here] and market competition is becoming more intense, bringing increased challenges to the company,” Zhang said.

“Yet, as both China’s GDP per capita and the residents’ consumption increase continuously, the demand for travel consumption is expected to grow in tandem.

“With the support of the government, investment in the tourism industry will continue to see relatively fast growth.”

China Travel’s share price dropped slightly from HK$2.29 to HK$2.27 on Wednesday, down 0.87 per cent.