20160418-三星证券-Leisure_OVERWEIGHT_Sector-wide_worries_to_increase_volatility_18页_788kb

Sector Update Summary - Leisure (Overweight)

Core Content

This document provides an update on the Korean Leisure sector, focusing on the performance and outlook of several key companies, including Kangwon Land, Paradise, Grand Korea Leisure (GKL), Hotel Shilla, Hana Tour Service, and Mode Tour Network. The report highlights the current market conditions, earnings expectations, and valuation metrics for these companies.

Main Points

• Market Volatility: Sector-wide concerns are expected to increase volatility due to various factors such as potential DFS license issuances and abnormal operations in the first quarter.
• Earnings Outlook: Despite challenges like unfavorable forex rates and domestic economic conditions, some companies are expected to perform better than anticipated.
• Target Price Adjustments: Target prices for Hana Tour Service, Mode Tour Network, and Hotel Shilla have been cut by 14%, 5%, and 9%, respectively, to KRW120,000, KRW40,000, and KRW100,000.
• Impact of Earthquakes: The earthquakes in Japan negatively impacted outbound travel to Japan, which affected the performance of Korean travel agencies. However, this could lead to increased Chinese visitors to Korea.
• Outbound Package Sales: Falling oil prices led to strong performances in outbound package divisions for Hana Tour and Mode Tour, despite challenges in 1Q.
• DFS Industry: The DFS industry in Korea is expected to benefit from a stronger yen, lower base due to MERS, and increased Chinese visitors due to the Japan earthquake.

Key Companies Overview

Kangwon Land

• Target Price: KRW52,000 (19.8%)
• Operating Profit: Expected to reach KRW655.1b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 21.1 in 2015 to 19.0 in 2016.

Paradise

• Target Price: KRW25,000 (53.4%)
• Operating Profit: Expected to reach KRW85.4b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 33.2 in 2015 to 22.3 in 2016.

Grand Korea Leisure (GKL)

• Target Price: KRW36,000 (34.8%)
• Operating Profit: Expected to reach KRW141.7b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 18.0 in 2015 to 15.4 in 2016.

Hotel Shilla

• Target Price: KRW100,000 (44.7%)
• Operating Profit: Expected to reach KRW170.9b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 122.4 in 2015 to 26.6 in 2016.

Hana Tour Service

• Target Price: KRW90,500 (32.6%)
• Operating Profit: Expected to reach KRW55.2b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 32.3 in 2015 to 24.1 in 2016.

Mode Tour Network

• Target Price: KRW28,700 (39.4%)
• Operating Profit: Expected to reach KRW22.3b for 2016.
• Valuation Metrics: P/E ratio is projected to decrease from 27.7 in 2015 to 19.9 in 2016.

Key Insights

• The DFS industry in Korea is expected to outperform Japan due to the yen's strength against the won and the potential for increased Chinese visitors.
• Hana Tour and Mode Tour are expected to benefit from the strong performance of their outbound package divisions due to falling oil prices.
• The impact of the Japan earthquakes on outbound travel is expected to be temporary, with a potential rebound in the third quarter.
• Valuation metrics for all companies are projected to improve, with P/E ratios decreasing as operating profits are expected to rise.
• The report suggests that investors should consider accumulating shares of these companies on corrections due to their strong fundamentals and positive outlook.