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雷达卡
Seeing is believing
They have arrived: It’s a bird…it’s a plane…it’s Chinese tourists
arriving in Taipei! Even if you only saw the images on TV, it’s not
difficult to fathom the significance of this event, which was one of the
Ma administration’s key campaign promises. We believe the tourism
industry, and above all the hotel sector, is set to benefit significantly.
Supply of new rooms to remain tight until 2010: Our supply/demand
model suggests that if visitors per day in 2009 increased by 3,285
persons for all of Taiwan and 2,872 persons in Taipei City, occupancy
rates could hit 95%. We believe a 20-40% increase in room rates is
reasonable, given that room rates are 10-15% higher during peak
months. In fact, room rates for 5-star hotels in Taiwan are 25-40%
lower than Hong Kong’s “High-Tariff A Hotels” (which had an average
occupancy rate of 84% in 2007).
Higher occupancy and room rates the key catalyst for earnings: The
arrival of Chinese tourists will improve hotel occupancy and room rates
and act as a key catalyst for hotel shares in Taiwan. 2007 occupancy
rate was 67.2% for Taiwan as a whole, and 75.5% for Taipei City.
Higher occupancy rates will likely result in room rates rising 20-40%,
serving as a catalyst for earnings growth across the sector. We forecast
EPS for Grand Formosa Regent Hotels (2707 TT; BUY) to see growth of
32% and 29% in 2008 and 2009 respectively. For Ambassador Hotels
(2704 TT; BUY), we forecast EPS growth of 83% and 19% for 2008 and
2009 respectively. The Sheraton Hotel (Taipei) pays 25% of its revenue
to Cathay No. 1 REIT (01002T; BUY), which should benefit significantly
from rising room rates we expect Sheraton to contribute 80% of the
company’s revenue.
Recent correction provides entry point: Taiwan’s hotel index is down
29% since June 9, largely on the back of the lowered expectations of
Chinese tourist arrivals (1,000 tourists per day vs. previous
expectation of 3,000). In our view, this sell-off presents an attractive
entry point and we suggest investors BUY Ambassador and Formosa
International Hotels, with a respective target prices of NT$63 (21%
upside) and NT$616 (40% upside). We also recommend BUY on Cathay
No. 1 REIT with a target price of NT$13.0, implying 25% upside.
Seeing is believing
We estimate a 2007-10F CAGR for total visitors to Taiwan of 18.1%
With the arrival of Chinese tourists and the likely further warming of cross-Strait
relations, the total number of visitors coming to Taiwan is set to increase
significantly. We expect the total number to eclipse 4 mn for the first time in 2008
and we forecast a 2007-10F total visitor CAGR of 18.1%. Our estimates include a 5%
per year increase in visitors from countries other than China and the following
assumptions regarding Chinese visitors: 1) 4,000 Chinese tourists per week for the
rest of 2H08; 2) for 1H09, we assume 6,000 Chinese tourist arrivals per week
(1,500 per day, but only on weekend charter flights, four days a week); 3) for 2H09,
we assume 21,000 tourists per week (3,000 tourists per day, on daily chartered
flights); and 4) for 2010, 35,000 tourists per week (5,000 travelers per day, seven
days a week).
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