We had a conference call with Haichang Ocean Park’s management this week to discuss the company’slatest developments. We note the construction of its flagship park in Shanghai is on schedule. Inaddition, the firm’s headquarters officially moved to Shanghai on 5 December, in preparation for theopening of the new flagship park in August 2018. Given the solid performance of existing parks and thesmooth development of Haichang’s Shanghai park, we maintain our EPS forecasts of Rmb0.06 in 17E(+20.0% YoY), Rmb0.08 in 18E (+33.3% YoY), and Rmb0.10 in 19E (+25.0% YoY). Our target price isunchanged at HK$2.35. With 39.9% upside, we maintain our BUY recommendation.
Solid performance among existing parks. The firm’s cooperation with “Where Are We Going, Dad?” TVshow (fifth season) during the Golden Week and evening show additions in parks, including TianjinPark, contribute to the solid growth of the company’s eight existing parks, for which we expect lowteensrevenue increase in 2H17E. The two newly added “Jellyfish world” exhibitions in Chengdu andTianjin parks had a positive contribution to non-ticket sales. We note non-ticket sales contributed 20-30% of total revenue in existing parks, with southwestern parks recording a higher averagecontribution (c.30%), thanks to a larger proportion of individual visitors, compared with northeasternparks (c.20%), which had more group visitations.
Flagship park in Shanghai on schedule. Shanghai Disneyland attracted 11m visitors during its first yearof operation, in line with industry expectations. The average spending per visitor reached c.Rmb600,with c.40% coming from non-ticket sales. Our previous forecasts of 2.8m visitors (25% of Disneyland’stotal visitation) and non-ticket sales contribution of less than 20% were very conservative. Therefore,we expect the park alone to contribute more than 20% of the firm’s total revenue for the full year.
According to management, the progress of the company’s flagship park in Shanghai is on schedule andthe park is expected to open in August
- We forecast the new park’s five-month operation in 18Ewill contribute at least 10% of total revenue and c.8.3% of parks’ total gross profit.
Growing asset-light business. Thanks to new contracts signed this year and revenue recognition, weexpect the firm’s asset-light business to experience 30%-plus YoY increase in revenue (higher than ourprevious forecast), on the back of the company’s marine park management experience.
Maintain BUY. Given the solid performance of existing parks and the smooth development ofHaichang’s Shanghai park, we maintain our EPS forecasts of Rmb0.06 in 17E (+20.0% YoY), Rmb0.08 in18E (+33.3% YoY), and Rmb0.10 in 19E (+25.0% YoY). Our target price is unchanged at HK$2.35. With39.9% upside, we maintain our BUY recommendation.
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