Kosdaq report (46) Hana Tour expects record profit

Hana Tour expects record profit this year

This is the 46th in a series of articles analyzing companies listed on the Kosdaq, Korea’s secondary stock market loaded with tech firms. - Ed.
Hana Tour Services Inc., the nation’s top travel agency, aims to set a new profit record this year on the back of an explosive rebound in travel demand, its chief executive said.
“It looks like we’ll be able to pull off business results as good as in 2007,” Kweon Hee-seok, CEO of Hana Tour, said in a recent interview with The Korea Herald.
“We’ll be able to achieve an operating profit of 40 billion won ($35.3 million), even after we make new investments for business expansion,” he said.
2007 was the peak of an overseas travel boom. Hana Tour’s operating profit that year was the highest on record at 35.4 billion won and net profit at 27.7 billion won.
If the company achieves its 2010 target, it would represent a dramatic turnaround from a deficit of 4.8 billion in net profits last year.
As the overall economy picks up, the local tourism sector is recovering much faster than expected, Kweon said. The pace of the rebound was so fast that the company couldn’t meet customer demand in the first few months of the year, including Lunar New Year holidays.
Samsung Securities Co., a leading brokerage firm based in Seoul, picked Hana Tour as one of six stocks that have the brightest earnings outlook in the first quarter of this year, along with Samsung Electronics and Kia Motors.
Hana Tour is an undisputed leader in the Korean tourism industry, holding the largest share of the outbound market. Of all Koreans departing the country, about 13 percent are those traveling with Hana. No. 2-ranked Mode Tour holds a market share of around 7 percent.
The firm wholesales a variety of travel-related services. It provides outbound, inbound and domestic travel packages and also works as a general sales agency for overseas cruise and rail passes.
Kweon’s vision for Hana Tour goes beyond the domestic market.
“2010 will mark a new start for us in a campaign to become one of the world’s leading travel services provider by 2020,” he said.
The firm’s accumulated know-how in the wholesale business and its price competitiveness, which comes from the vast number of travelers it sends out to Asian countries, will be the basis for global success, he said.
Hana Tour sends about 340,000 Koreans to China a year and about 250,000 to Japan, making it the region’s single largest travel agency in terms of number of travelers to the two countries.
China, with its potential for explosive growth, is the core target.
In 2008, Hana Tour established a local subsidiary in the country, becoming the first travel firm to do so. Last week, the firm opened a second Chinese subsidiary in Shanghai.
“By 2020, about 1.1 billion Chinese will be venturing overseas a year for holidays and business trips. This is beyond comparison with Korea or Japan,” he said.
Many firms, local and foreign, are active already, aiming to ride on this looming travel boom in China, but there is no major player in the wholesale business yet, he said.
With global ambitions, the company listed its shares on London Stock Exchange in 2006. It made a local debut on Kosdaq back in 2000. It was the first IPO by a travel agency in Korea.
In the past years, Hana Tour has been a favorite pick for foreign stock investors, with sound finances, relatively transparent corporate management and generous dividend policies.
Kweon expects foreign investors, who had dumped the company’s shares amid a flight from emerging markets in the aftermath of a global financial crisis, will come back, lured by its bright business outlook.
“Hana Tour will continue a dividend policy that we return a third of our profits to shareholders,” he said. 

By Lee Sun-young
(milaya@heraldcorp.com)