Tourism companies (DAH) recover thanks to restructuring
Tourism companies (DAH) recover thanks to restructuring
In the past two years, the impact of COVID-19 has hit listed tourism companies’ activities hard, leading to persistent losses and some stocks being given a warning status, and even risk being delisted. However as many businesses turn to restructuring operations, their results have become more positive.
Restructuring boost
In its recently released fourth-quarter business result, Dong A Hotel Group (DAH) reported bullish results, despite damage from the pandemic to tourism activities.
The company’s net revenue was over VND377.5 billion (US$16.6 million) in the fourth quarter of last year, while in the same period last year it was just VND4.5 billion.
Therefore, DAH posted a profit after tax of VND24.7 billion, after losing VND31.5 billion in the fourth quarter of 2020.
Dong A said that the surge in revenue was driven by its restructuring of operations and expansion into other business sectors. This helped the company offset losses from the tourism business.
At the annual general meeting of shareholders held in mid-May 2021, the Board of Directors of the company asked for shareholders' opinions on expanding into construction, ground filling and building materials. The change clearly had a positive impact on the company's business activities in 2021.
Thanks to restructuring in the second half of 2021, the company’s profit after tax reached VND39.1 billion last year, while it lost more than VND33.1 billion in 2020.
In the first six months of last year, Dong A was still under the negative impact of the COVID-19 pandemic, with its profit just being VND465 million.
Recently, as part of the restructuring, it announced a suspension of business of Dong A Nha Trang Co., Ltd. from January 16 to December 31, 2022, due to inefficient operation.
Hoi An Tourist Service JSC (HOT) also witnessed some outstanding performances in the fourth quarter of 2021. Even though it still record a loss of VND3.1 billion during the period, the loss declined by more than VND4 billion compared to the same period of 2020.
The company said that, with the goal of reducing losses, in 2021, it has switched to attracting Vietnamese citizens from abroad to repatriate, who have to be quarantined to prevent the spread of COVID-19, at two affiliated hotels. This helped the company’s net revenue in the fourth quarter of 2021 jump by 170 per cent year-on-year to VND8.1 billion.
Hoi An Tourist also strengthened monitoring measures and cuts costs, reducing losses from business activities. Profits from the liquidation of fixed assets at its branches also reduced the loss of the whole company.
Therefore, for the whole 2021, the company posted a loss of just VND20.8 billion, down from the 2020’s loss of VND25.1 billion.
Similarly, Ben Thanh Tourist Service Corporation (BTV)'s losses in the last quarter of 2021 fell by 44 per cent on-year, thanks to a cut in general, administrative and sales expenses, down 34 per cent and 41 per cent, respectively.
Investment opportunities
Statistics of Fiinpro showed that in 2021, tourism and entertainment is one of the three industry groups with the lowest growth in the stock market, up only 6.3 per cent. This figure is much lower than the 36 per cent gain of the market benchmark VN-Index.
On the liquidity front, the trade of travel and tourism stocks was even quieter, as most stocks were not traded or traded in a small volume. Most small-cap travel and tourism stocks are on the warning list because of negative profit after tax in 2020.
The gloomy performance on the stock market is also in line with the heavy impact of the COVID-19 pandemic on this industry group. The financial statements of the fourth quarter of 2021 of listed tourism companies show that many businesses are still making losses due to the severe devastation of the COVID-19 epidemic.
The general picture of the industry is still very pessimistic and many businesses are struggling to find solutions to adapt and increase revenue.
Experts from KB Securities Viet Nam JSC (KBSV) said the restaurant service and tourism industry is expected to recover in 2022, though maybe not to pre-pandemic levels.
The industry, recently, also sees more positive signals, thanks to the reopening of internal and international flights. This not only helps the tourism industry recover but also many other sectors, especially businesses with foreign experts.
In addition, domestic tourism has resumed since the fourth quarter of 2021, corresponding to the Google Mobility index inching up from the low at the end of last September.
Right before the Tet holiday, the National Assembly approved a programme for socio-economic recovery and development in 2022 - 2023, while the Viet Nam Tourism Association has sent a dispatch to Prime Minister Pham Minh Chinh to propose some solutions to restore international tourism.
With these solutions, listed tourism companies are expected to recover. Therefore, travel and tourism stocks may be active again.
Currently, travel and tourism stock prices are traded at low levels. This will be an opportunity for investors, especially long-term investors, to invest in with expectations of the recovery of the industry in the near future.
