Jih Sun Securities Investment Consulting Co (日盛投顧) last week reduced its investment rating on FDC International Hotels Corp (雲品國際) to “neutral” from “hold,” expecting the effect of the 2019 novel coronavirus outbreak to weaken the leading hotel and restaurant operator’s business performance in the near term.
The downgrade was inevitable after the government issued a “red” alert for travel to China, including Hong Kong and Macau, while bookings for catering or accommodation have been canceled or deferred to next quarter, Jih Sun said in a note on Thursday.
FDC International owns the Fleur de Chine Hotel (雲品溫泉酒店) near Sun Moon Lake and the Palais de Chine (君品酒店) close to Taipei Railway Station, as well as independent dining facilities.
With no proven vaccine or treatment, and fears that the virus’ spread might worsen, market sentiment would likely remain negative for some time, Jih Sun said.
The 2003 SARS epidemic continued for about six months and led to a sharp decline in foreign arrivals at the time, it said.
Visitors from China, Hong Kong and Macau account for 10 to 20 percent of FDC’s accommodation revenue, but it is difficult to estimate the effects of deferral and cancelations by other foreign guests, Jih Sun said.
FDC’s revenue this quarter is forecast to decline 25 percent year-on-year to NT$505 million (US$16.76 million), with the overall impact dependent on how well the epidemic is controlled, Jih Sun said.
Jih Sun also revised downward its revenue and profit estimates for FDC this year, expecting revenue to drop 7.53 percent from NT$2.38 billion last year to NT$2.2 billion and net income to dip 19.56 percent from NT$204 million to NT$164 million, or earnings per share of NT$2.5.
FDC shares are down 12 percent this year, while the broader market has fallen 3.2 percent.
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