Latest Carnival International News

The latest news from Carnival International is that leisure projects are advancing as planned, and strong land reserves support real estate sales prospects.

1. Adjusted net profit turned around in the first half of 2017. Carnival International’s net loss in the first half of 2017 was HK$206 million, an increase from the mid-term loss of HK$156 million in 2016. However, excluding non-cash and one-time items, the group recorded adjusted EBITDA of HK$195 million and adjusted net profit of HK$121 million during the period, mainly benefiting from increased property sales and increased dividends from investment income. Due to the increase in debt financing, the debt ratio increased by 2.5 percentage points during the period to the level of 101.5 at the end of June 2017.

2. Land bank remains strong. Revenue from the property sector increased significantly from HK$12.0 million to HK$515 million, mainly benefiting from the growth in residential sales in Qingdao and Chengdu. Based on (1) there are still properties for sale worth approximately HK$4.7 billion in Chengdu and Qingdao; (2) an additional 83,000 square meters of land bank in Laoshan and (3) high-end residential properties in Hong Kong’s Southern District, it is planned to open in 2018-19 With the start of pre-sales, Carnival International's profits and financial performance are expected to be supported by the above-mentioned strong land bank.

3. The development of the Sea Carnival project is advancing as planned. The "Sea Carnival", positioned as a tourism and consumption resort complex, is advancing as planned. The group reached a cooperation with Marriott International in August this year, and Marriott will then be responsible for the operation and management of the Carnival Plaza Hotel. At the same time, the hotels/serviced apartments under the Carnival Plaza Hotel will be named "Renaissance"/"Marriott Executive Apartments" respectively. We believe this collaboration will increase the visibility of the hotel and serviced apartments and bring about management synergies, which will in turn increase RevPAR potential. In addition, by the end of 2017, two major brands, Salvatore Ferragamo and Gucci, will be stationed in the Carnival “Otesco”. The current occupancy rate of "Otesco" is 88%, and with the arrival of these two new brands, it will be close to full occupancy. The above-mentioned hotels and the latest development of "O-Tesco" will increase the potential of the Sea Carnival's traffic growth.

4. The branded O2O entertainment platform deserves a higher valuation. On September 17, 2017, Carnival International and the Fujian government reached a letter of cooperation and planned to develop a consumer resort and senior care complex project in Fujian. The completion of this project will help the group further build a one-stop modern experiential leisure and entertainment platform under the "Carnival" brand. Given that similar leisure and entertainment brands currently enjoy high valuations, we expect that the synergy brought about by the “Carnival” brand may unlock the value of the group. Based on the forecast book value per share at the end of September 2017, the group's current price-to-book ratio is approximately 0.8 times. Previous financing activities have also received positive responses from the market, reflecting investors' confidence in the group's prospects.