20161122-三星证券-Factors_behind_uptick_in_sector_volatility_15页_478kb

Sector Update Summary: Leisure (OVERWEIGHT)

Core Content

This document provides an analysis of the Leisure sector in South Korea, focusing on key companies such as Hotel Shilla, Paradise, Grand Korea Leisure (GKL), Kangwon Land, Hana Tour Service, Mode Tour Network, and CJ CGV. The report highlights sector volatility, performance metrics, and revised target prices based on current market conditions and company forecasts.

Main Points

Sector Volatility

• The sector has experienced increased volatility, attributed to several factors including currency depreciation (won weakening) and reduced demand for government officials using group tour services.
• Analysts suggest that further downward revisions in target prices might be necessary if 2017 company guidance is overly optimistic.

Target Price Revisions

• Hotel Shilla (008770 KS): Target price revised to KRW65,000 (28.5%).
• Paradise (034230 KS): Target price revised to KRW20,000 (49.3%).
• Grand Korea Leisure (114090 KS): Target price revised to KRW27,000 (27.1%).
• Kangwon Land (035250 KS): Target price revised to KRW45,000 (27.3%).
• Hana Tour Service (039130 KS): Target price revised to KRW80,000 (17.8%).
• Mode Tour Network (080160 KS): Target price revised to KRW36,000 (32.8%).
• CJ CGV (079160 KS): Target price revised to KRW85,000 (38.6%).

Performance Analysis

• Tour Operators:

  • Hana Tour Service's average parent-based sales growth has lagged behind Mode Tour Network by approximately 5% since 2014.
  • In 3Q2016, Hana Tour's sales growth was 9.1% y-y, while Mode Tour's was 10.9% y-y, with the gap expected to widen to 10% pts this month.
  • Very Good Leisure, a B2C package tour operator, posted a 36% y-y sales growth in 3Q2016, outperforming both Hana and Mode, despite political strife in Turkey.

• Cinema:

  • China's box office sales have declined 17% y-y since October 1, 2016, with no expected recovery before 2Q17.
  • Same site sales in China are unlikely to improve due to high annual supply growth of over 30%.
  • Korea's box office sales have also fallen 7.5% y-y since October 1, 2016, indicating no near-term margin improvement.
  • Despite this, CJ CGV remains a BUY due to its strong performance in Turkey and attractive valuation relative to global peers.

• Hotel Shilla:

  • The company's parent-based sales growth has been uneven, with a notable decline in 3Q2016.
  • The company's performance is influenced by its duty-free and hotel & leisure segments.
  • The stock is undervalued based on P/B and EV/EBITDA metrics.

• Paradise:

  • Paradise's sales and operating profit have shown mixed performance, with some segments experiencing declines.
  • The casino segment has been a significant contributor to sales, but non-casino sales have faced challenges.
  • Despite some declines, the company's operating margin has shown improvement in certain quarters.

• Grand Korea Leisure (GKL):

  • GKL's sales and profit have been stable, with slight declines in some quarters.
  • The company's valuation is attractive based on P/B and EV/EBITDA ratios.
  • The operating margin has remained relatively consistent over the years.

• Kangwon Land:

  • Sales and profits have been increasing, with notable growth in casino sales.
  • The company's valuation is attractive based on P/B and EV/EBITDA metrics.
  • The operating margin has improved over the years.

• Hana Tour Service:

  • The company's sales and profits have been fluctuating, with a notable decline in 3Q2016.
  • The company's valuation is not as attractive as Mode Tour's.
  • The stock is undervalued based on P/B and EV/EBITDA metrics.

• Mode Tour Network:

  • The company's sales and profits have shown consistent growth.
  • Mode Tour is preferred over Hana Tour due to its narrowing market-share gap.
  • The stock is undervalued based on P/B and EV/EBITDA metrics.

• CJ CGV:

  • The company's sales and profits have been declining, with a notable drop in 3Q2016.
  • The company's valuation is attractive relative to global peers.
  • Despite the decline, the stock remains a BUY due to its performance in Turkey and potential for margin improvement.

Key Information

• The report highlights the importance of advance bookings in the tour operator sector, with Mode Tour outperforming Hana Tour.
• The cinema sector in China is expected to see no recovery soon due to high supply growth.
• The Leisure sector is considered OVERWEIGHT, indicating a positive outlook despite current volatility.
• Valuation metrics such as P/E, EV/EBITDA, and P/B are used to assess the attractiveness of each company.
• The report suggests that further revisions to target prices may be necessary if company guidance is overly aggressive.