reasons to be possitive12 Apr 2010 12:55
Reduce text size Decrease text size Increase text size Increase text size Print article Print Share this article Share Email article to a friend Email After slashing losses in the first half, Chinese domestic travel operator Et-china has ‘great confidence’ about the sector’s prospects for the rest of the year.
The Guangzhou-based and Jersey-incorporated group, which owns the fifth largest tour operator in the People’s Republic and thanks to a recent acquisition is now the third-ranked online provider, cut post-tax losses 79% to RMB 4.9m (£439,000) in the six months to June.
While the first quarter, including the seven-day Chinese New Year period, went extremely well, the second was blighted somewhat by concerns about swine flu and the state of the domestic economy. The March purchase of Beijing-based online operator Yoee.com helped swell revenues 9.4% to RMB 840m (£74.1m) and with online sales the strongest part of the tour operating business, gross margin rose by 59 basis points to 11.6%.
Looking forward, chief executive Matthew Ng expects an ‘improved performance’ in the second half, with a 'Golden Week' of national paid holiday coming in October. He also expects big things for 2010 as the Shanghai World Expo, from May to October, and November 2010's Guanzhou Asian games boost internal travel, with the Government ‘heavily encouraging’ its citizens to attend such event.
There has been added interest in the company since high-end Swiss travel firm Kuoni bought a large stake of 31.8% in June, which Kuoini's CEO describes as the start of 'a key long-term strategic partnership' as it embarks on an expansion into China that is 'is one of [its] biggest milestones to date'. Kuoni’s China managing director Maria Ng – no relation – has now joined the board as a non-executive and talks to ‘establish a collaborative marketing strategy for the region’ under way.
Investing in the shares, down from their 127p float price from 2007, has not been a profitable business for most but at current levels may tempt speculative punts, espeically in light of the significance Kuoni seems to be putting on its involvement.
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