Travel Stocks, Temporary Performance Slump Unavoidable

[Asia Economy Reporter Song Hwajeong] It is expected that the poor performance of travel companies will be inevitable for the time being due to the novel coronavirus infection (COVID-19).

According to DB Financial Investment on the 24th, Hana Tour is expected to record an operating loss of 16.3 billion KRW in the first quarter of this year, turning to a deficit. Hwang Hyunjoon, a researcher at DB Financial Investment, analyzed, "The package outbound customers of Hana Tour, which was already sluggish, were hit hard by the impact of COVID-19 in the first quarter, causing a slump in outbound demand," adding, "In March, there was no demand for overseas travel regardless of the region. Accordingly, Hana Tour's first-quarter package outbound customer volume decreased by 75% compared to the same period last year, and the headquarters is expected to record an operating loss of 10.4 billion KRW." With inbound and outbound traffic shrinking overall, duty-free shops and Japanese subsidiaries are also inevitably affected, with subsidiary deficits expected to be 3.1 billion KRW domestically and 4.6 billion KRW overseas.

Modetour is no different. DB Financial Investment estimated that Modetour will record an operating loss of 9.3 billion KRW in the first quarter, turning to a deficit. Modetour's first-quarter package outbound customer volume was also hit hard by the global spread of COVID-19. Researcher Hwang said, "In March, when the impact of COVID-19 became full-scale, outbound travel demand was nonexistent, and Modetour's first-quarter package outbound customer volume decreased by 60% compared to the same period last year, resulting in a separate operating loss of 5.6 billion KRW and a combined subsidiary operating loss of 4.1 billion KRW."

It is forecasted that poor performance will continue for the time being. As of the end of March, the package reservation rate change rates for Hana Tour in April, May, and June are -100%, -98%, and -91%, respectively. For Modetour, they are -100%, -97%, and -91%. Researcher Hwang said, "Due to the impact of COVID-19, the sentiment toward overseas travel has significantly shrunk, and conditions are at their worst globally, with entry itself becoming impossible," adding, "The domestic outbound market is expected to remain stagnant for the time being, and mid-to-short-term poor performance is inevitable."

Following these performance forecasts, the investment opinions and target stock prices for Hana Tour and Modetour have also been downgraded. DB Financial Investment lowered the investment opinions for Hana Tour and Modetour from 'Buy' to 'Hold.' Hana Tour's target stock price was lowered from 65,000 KRW to 43,000 KRW, and Modetour's was adjusted down from 18,000 KRW to 13,000 KRW. Researcher Hwang said, "If signals of recovery in overseas travel demand are detected in the future, stock prices could rebound quickly, but since it is still difficult to predict the timing of recovery, a conservative approach is necessary for the time being."

This content was produced with the assistance of AI translation services.