Travel Stocks, The End of Restructuring Approaches

On the 24th, amid concerns over the spread of new variants of the novel coronavirus (COVID-19), overseas arrivals are waiting for transportation guidance at Terminal 1 arrivals hall of Incheon International Airport. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] The restructuring of travel stocks, which were directly impacted by COVID-19, is nearing completion. With signs of overseas travel restrictions easing due to COVID-19 vaccinations, expectations are rising. Hana Financial Investment analyzed on the 3rd that travel stocks are preparing for normalization through bold and rapid restructuring.

In the case of Hana Tour, in addition to the suspension of operations at SM Duty Free, it is undergoing subsidiary restructuring, including the decision to sell Timark Hotel, a loss-making division. It is estimated that the Timark Grand Hotel's losses, under a lease agreement, have been reduced to less than 2 billion KRW annually. Workforce restructuring has also progressed sharply. Hana Financial Investment forecasted that simply summing up the improvements in duty-free shops, hotels, and workforce restructuring shown in the quarterly report would result in an annual profit improvement effect of over 60 billion KRW. Accordingly, Hana Financial Investment projected Hana Tour's sales to decrease by 41% year-on-year to about 5.7 billion KRW. Operating losses are expected to be 28.1 billion KRW, in line with the market estimate of a 27.2 billion KRW deficit. The target stock price was maintained at 89,000 KRW.

Modetour is also in the midst of restructuring. The one-time labor cost savings related to employees' annual leave issues in the first quarter have normalized. A particularly notable point is that among subsidiaries, the sale of Jayutour, which had the highest potential but large losses, in the first quarter has increased profit potential. Accordingly, Hana Financial Investment expects Modetour's second-quarter sales and operating losses to be 3 billion KRW and 7 billion KRW, respectively, falling short of market expectations, but raised the target stock price to 32,000 KRW.

Researcher Kihoon Lee of Hana Financial Investment stated, "The maximum profit potential upon travel normalization due to COVID-19 vaccinations is expected to exceed 100 billion KRW for Hana Tour," adding, "Modetour and Interpark are estimated at 45 billion KRW each."

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