Tourism stocks expected to shine bright in 2022

Tourists visiting a beach in Da Nang City during the Tet holidays. - VNA/VNS Photo Tran Le Lam

On February 15, Viet Nam officially reopened international flight routes. The planned reopening of tourism activities in March has brought positive signals on the strong recovery of the country’s tourism industry in 2022.

In addition, on February 17, at the seventh ASEAN Economic Community (AEC) Dialogue, all participants emphasised the awareness of mutual recognition agreements in the tourism sector and the need to accelerate the reopening to resume tourism activities post COVID-19. They also affirmed that deeper integration will further boost the financial and tourism sectors of the region.

Responding to the above positive news, tourism stocks surprised the market.

Statistics showed that on February 17, many stocks went to a hard ceiling, with VTD, OCH Hospitality & Service JSC (OCH), CTC, Dong A Hotel Group JSC (DAH ), VNG and NVT, hitting the ceiling prices. In addition, Superdong Fast Ferry Kien Giang JSC (SKG) jumped by 2.6 per cent.

Closing the session on February 18, DAH and NVT recorded ceiling prices for a second straight session. The rest were up in a range of 0.6 - 6.8 per cent, such as VTD up 6.8 per cent; OCH rising 4.1 per cent, and CTC up 3.2 per cent.

Tourism stocks have not received much interest from investors despite witnessing good business results and high dividend payments. The reason is partly that the trading volume is small, resulting in low liquidity.

Moreover, during the last two years, COVID-19 clouded the industry’s outlook, making tourism stocks less attractive.

However, the recent strong rallies on bright prospects show that they are promising stocks in the post-pandemic era.

Data showed that in the first two months of 2022, demand among international and domestic tourists tended to increase remarkably.

Nguyen Chau, CEO of Oxalis Adventure, said that the number of tourists booking tours in March and April had reached more than 80 per cent. Many accommodation facilities were fully booked on April 30, which is a national holiday, while others were preparing to welcome guests in the summer, Chau added.

He raised concerns about the shortage of human resources working in the tourism industry after the pandemic, affecting the recovery of the industry.

In the past two years, the COVID-19 pandemic has destroyed the tourism industry, casting a gloomy outlook on the industry’s general profit.

Poor profit periods

Hoang Kim Tay Nguyen Group (CTC) said that its profit after tax in 2021 was negative, as its revenue in the fourth quarter of last year plummeted by nearly half over the same period of 2020 to only VND34.7 billion (US$1.5 million). The company explained that the outbreak of the disease had greatly affected operations, especially hotel and restaurant businesses, while expenses still had to be allocated.

Similarly, Ninh Van Bay Travel Real Estate (NVT) continued to record a fourth consecutive quarter of losses, reporting a loss of VND65.1 billion in 2021. Its total accumulated loss now is approximately VND708 billion, accounting for 78 per cent of the company’s charter capital which is VND905 billion.

Meanwhile, Thanh Thanh Cong Tourist (VNG) also said that its holding company posted a loss during the period. However, thanks to the restructuring of the investment portfolios of its subsidiaries, the company still recorded a consolidated profit after tax of VND1.2 billion.

Vietourist Travel (VTD) and Daseco (DSN) are other companies applying the same strategy of increasing profits of financial investment activities to offset losses in the core businesses.

In 2021, Daseco saw its net revenue reach VND25.2 billion, down more than 70 per cent compared to 2020. Running business below cost has caused the enterprise to report a gross loss of VND1.5 billion, while in the same period of 2020 it recorded a gross profit of VND51 billion.

The highlight in its business results in 2021 was financial revenue tripling to nearly VND41 billion, which mainly came from transferring of securities. Therefore, it still reported a profit after tax of more than VND24.2 billion, down 41 per cent over 2020. This was also the lowest profit of Daseco since 2008.

Economic experts say that tourism plays an important role in national economic development, which is considered one of the three key economic sectors, contributing positively to the growth of the economy as a whole.

However, the ongoing pandemic has had a strong impact on the Vietnamese economy, and tourism has been hit hard. Flight bans, travel restrictions and tourists’ concerns over the pandemic have caused many hotels, restaurants and retail chains in tourist destinations to be deserted, and tourism revenue plunged.