UBS Investment Research：Hong Kong & China Daily Comment

14 February 2008

pdf，45页，长

Good 2007 results, but valuation unattractive
􀂄 2007 results is above expectation
Lijiang Tourism reported a 19% YoY increase in revenue, while net profit
increased 41% YoY to Rmb66.7m, which is 20% higher than our estimates. EPS
was Rmb0.67. The higher-than-expected net income was mainly due to a lower tax
rate. In 2007, the actual tax rate was only 17.3%, much lower than the historical
tax rate, as Lijiang Tourism has received government approval to lower its tax rate.
􀂄 The Big Cableway is the earnings driver
While the total tourist number increased less than 1% to 1.69m in 2007, tourist
numbers at The Big Cableway increased 18% YoY, and was the largest revenue
and profit contributor to Lijiang. The number at The Spruce Meadow Cableway
fell 12% YoY, a result of capacity upgrade work.
􀂄 Cable ticket price hike is below expectation
Lijiang announced on early January, that it has the approval to raise the ticket price
of the Spruce Meadow Cableway by an average 15%, to Rmb46 per person, which
is lower than our expectation of a 30% YoY increase.
􀂄 Valuation: rating downgrade, PT raised
We raise our EPS estimates from Rmb0.5 and Rmb0.68 for 2008 and 2009 to
Rmb0.74 and Rmb0.91 respectively, and introduce our 2010 earnings estimate. We
raise our DCF-based PT from Rmb21.7 to Rmb26.02 based on our increased
earnings forecasts but downgrade our rating from Neutral to Sell on what we think
is the stock’s expensive valuation.