2024 Week 46 - Travels
China Tourism Group Duty Free, Travelsky, Samsonite, Fairfax India
My complaint about travelling is that it is no longer like what it is in the past (before google map). Everyone is going to the same place, doing the same stuffs and taking the same photos. Where is that sense of adventure, wonder and awe if everything you are doing is all tried and tested?
Human race is ready for space exploration. For that I am much inline with Elon Musk. Mars, here we come!
If you are not making plans to travel to space, I believe it make ton of sense to travel to less well travelled places. They are definitely more interesting than Mars and the money you bring along and spend will help lots.
On the other note, is revenge travelling really slowing down or are we just missing the Chinese tourists?
From what I have gathered, the usual haunts like Japan and Thailand are still fully booked. Higher cost may have make everyone think twice about flying to Europe or the US or even Australia? Maybe one might also consider skipping travelling to the US because of Trump’s election win?
Airline capacity continues to come online in a rapid manner and ticket prices are looking reasonably affordable despite record demand. Maybe this is time to relook at some travel stock since this is what every middle class human seems to want to do?
Let talk retail, technology, luggage and finally an airport (vested).
Shopping at Duty Free at China Tourism Group Duty Free Corporation in Beijing?
Travelling through any China airport, you will see a familiar sign throughout most of them. While the Beijing Capital Airport is slowly healing from the increase in inbound foreigners and mostly from the improvement in domestic tourism, we cannot say the same for duty free shopping within the Chinese airports.
CDF is interesting as duty free spending has always tend to hold up pretty well across various time period. I guess there is always a tendency to splurge and spend that extra dollar when you are travelling or passing through an airport?
For the penny pincher like me, I may try to find that extra dollar bill and spare change to buy another cup of coffee or chocolate to make my wait in the airport more tolerable. For the extravagant Chinese, maybe they would grab their excess wad1 of cash to buy a Louis Vuitton bag?
Since CDF is almost everywhere they should be the bellwether of duty free spending in China. We know that most of the Chinese are travelling within China, so they should be at least be a good amount of spending within the airports?
Looking at the numbers below, things are not looking so good. Retail spending continue to slow leading to lower operating profit. The Chinese’s retail spending seems to be in a free fall and the government continue to be chill about it?
Checking in and checking Travelsky
If there is one thing we cannot avoid is the airport system.
TravelSky Technology Limited (TravelSky) is the dominant provider of information technology solutions for China’s aviation and travel industry. It is among the largest Global Distribution System operators in the world with Sabre, Amadeus and Travelport. This system 1. provides inventory and prices control services to airlines, 2. reservation and ticketing services to airlines and travel agencies and 3. check-in, departure services to airports.
This business is simple.
More passenger traffic = more ticket issued = more profit
The company still sport a 20% net margin without the full recovery of the international tourism segment. With a monopoly status and depressed earnings, the company is priced at a PE of 18x despite its share price being closer to the lowest it has been in the past 5 years.
Any improvement in net margin and earning will directly add to the share price at probably 18x.
Are you buying a Samsonite or just a luggage?
Sometimes, you take your own experience and try to extrapolate into an understanding of a firm.
Sometimes it works but mostly it doesn’t.
But I am going to try anyway.
Recently, I went out and bought 3 really good looking Pierre Cardin luggages for a pretty affordable SGD $300 and I wonder why anyone would part with SGD $400 to just get ONE measly Samsonite2?
Extrapolating from my shopping experience, I am sure that Samsonite’s latest quarter is a disaster since Samsonite is no longer the only good looking luggage bag maker in town. Sales have tapered off 8% and operating profit are off by 27%.
Commentary talks about an increasingly tougher retail market in China and tougher wholesale market in North America. They also mentioned higher promotional activities in India. Lower revenue, lower gross margin make it sound like Samsonite share price which is near one year low could be even lower soon.
Flying and Queuing at Kempegowda International Airport (Fairfax India)
I first talked about Fairfax India on Sep 18th 2020. It has been 4 years.
The new terminal is billed as one of the most beautiful airport in the world. And it seems that the constant traffic jams seen in the city centre has now also arrived at the Bangalore - Kempegowda International Airport’s runway.
“Once flying from Goa to Bangalore, the pilot announced in Goa that we are delayed due to Air traffic at Bangalore . That time I realised that Bangalore has got traffic everywhere.”
-The Indian Express
With Kempegowda International Airport expected to be completely filled by 2033 or even earlier, there is an urgent need to plan for a 2nd airport.
On the 19th October, M B Patil, Karnataka’s Minister for Infrastructure Development indicated that the location of the new airport was going to be finalized soon.
When Kempegowda International Airport was inaugurated in Devanahalli, a clause was introduced prohibiting the construction of another airport within a 150-kilometre radius of Kempegowda International Airport until 2033.
So there is a good chance that it will still be BIAL who has the right to operate the new airport and that should be wildly positive for Fairfax India.
Fairfax India continues to be the cheapest way to get access to the Indian market. The only worry is the tariff revision that is coming in 2026. That should be a minor issue now since the regulator needs to work with BIAL on the planning and building of the 2nd airport. BIAL may even get some reprieve from the tariff due to the planning for the new airport.
It has finally doubled from my initial price of USD 7.4 and it is up 28% since 1 year ago.
I expect it to go higher as soon as the news get confirmed? If not, expect some derating from the disappointment. There is also possibility of the Indian market collapsing into more sane valuation which could drive down the share price.
Suddenly, it occur to me that spending is down because most people no longer carry cash in China. That is no wad of cash lying around.
I will find out the cost of paying for cheap luggage during my end of the year trip