Thursday, June 10, 2010


Valuations now look attractive. Asiatravel’s share price has fallen 38% since our last report in Apr 10. At the current price, Asiatravel is trading at 14.7x P/E, which is 35% below its peers. Although Asiatravel’s operations are smaller, we do not think it warrants such a deep discount, given that it has a well-developed online booking platform. Although it’s near term performance may be somewhat affected by the situations in Thailand, Dubai and the continued closure of the Battlestar Galactica at Universal Studios Singapore (USS), we remain positive of its long term prospects. The recovery in ARRs from 2HFY10 would provide support for FY revenue growth (despite lower revenue in 1HFY10), but earnings growth is likely to be dampened by start up costs for its new products. We expect Asiatravel to be able to maintain its dividends, which translates into a decent yield of 5.7%. We have lowered our FY10 earnings estimate to S$5.7m (previously S$6.2m) and our revised TP is now at S$0.56 (previously S$0.61). With the dip in the share price, we think it is a good opportunity to accumulate this stock. We are upgrading our recommendation to BUY.

Well-developed online platform allows it to be different. Asiatravel recently rolled out a state-of the-art Online Packaging Module with instant confirmation to end-consumers. Travellers can now book travel packages through its website, to all major destinations in Asia with instant confirmation. It has also developed an online B2B platform, which allows contracted travel agencies to book travel products online with instant confirmation, making it a more efficient for travel agencies (travel agencies traditionally had to book travel products offline).

Visitors staying longer. Visitor arrivals in Singapore have been rising (Apr: 20.4% YoY; Mar: 17.3% YoY) and visitors are also extending their stay (visitor days in Apr rose 15.5% YoY from a year ago). Asiatravel could possibly benefit from this trend, as this indicates higher general demand for room nights, which would support the recovery of ARRs in the industry, and also possibly higher demand for in-bound travel packages.

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