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KGI Alert: Lion Travel (2731.TW/2731 TT, NR): Analyst meeting takeaways




KGI Greater China


20 Mar 2014





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What’s new Lion Travel will release 2013 results on March 28. Ahead of the meeting, management met with investors to discuss strategies for 2014. Implications Record-high numbers in 2013. Consolidated sales were NT$15.8bn (up 18.8%) in 2013, a record high. The company said outbound travelers from Taiwan were 11.0mn, up 6.8%. With the deepest penetration among travel agencies in Taiwan, and the ability to offer a wider variety of package tours, Lion Travel siphoned market share from competitors. This was the key factor in higher-than-industry sales growth. Management estimates its domestic market share was 13% in 2013, up 0.9ppts YoY. Sales breakdown. Outbound travelers accounted for 93.6% of consolidated sales last year, and domestic and inbound tourists 6.4%. Among outbound travelers, tours to Japan and Korea were 32.7% of consolidated sales, followed by long-haul trips (e.g. US, Canada, Europe) (28.6%), Southeast Asia (14.1%) and Hong Kong, Macau and China (13.1%). Management said tours to Japan increased as a result of the open sky agreement, while visitors to China declined on bird flu concerns. Thailand saw a significant drop in Taiwanese visitors due to months of mass protests and political unrest. Store expansion plans in 2014. As of end-2013, Lion Travel had 63 branches island-wide, representing the deepest penetration among travel agencies in Taiwan. Having presence in most cities in Taiwan allows the company to better serve and provide timely feedback to customers. The target is 70 stores in 2014. Management said more stores in Taiwan will allow it to tap deeper into the domestic tourism market, a segment that Lion Travel has emphasized less in the past. Overseas, Lion had 11 branches in 2013; this year, it will add branches in Beijing and Southeast Asia (among Singapore, Malaysia, Indonesia and the Philippines). Overseas branches provide up-to-date information for outbound travelers from Taiwan, which enhances Lion’s services and value-added to its customers. New business & guidance. Lion said it is likely to be granted new licenses in China in 2014, allowing it to book tickets and hotels for visitors from Shanghai to Hong Kong and Macau. While it did not disclose details, management expects operating expenses to increase in 2014 as a result of new business in China. With sales likely to grow in the high single digits this year, management guided flat earnings growth for 2014. Valuation Shares are at 24.5x consensus EPS of NT$5.06, the mid/ upper end of the historical band. Risks Fewer-than-expected Taiwan departures; slower-than-expected easing of restrictions on travel to Taiwan by Chinese tourists; a decline in domestic tourism.

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