Research Update: China Tourism Group And Hong Kong Subsidiary Outlooks Revised To Stable On Fast Recovery; 'A-' Ratings Affirmed

China Tourism Group Corp. Ltd. (CTG) will recover faster than we initially expected with domestic travel back to near normal in China and strong online sales. We are increasing our EBITDA margin assumption to 9.5%-10.5% for 2020 from 8.5%-9.5% (still below 12.4% in 2019) based on rent concessions provided by airport operators and a move toward 100% commission-based rent. We project that CTG's debt leverage will drop below 3x by the end of this year. We continue to view China Travel Service (Holdings) Hong Kong Ltd. (CTS HK) as a core subsidiary of CTG. The ratings and outlook on CTS HK will therefore move in line with those on CTG. On Sept. 15, 2020, S&P Global Ratings revised its rating

...- China Tourism Group Corp. Ltd. (CTG) will recover faster than we initially expected with domestic travel back to near normal in China and strong online sales. - We are increasing our EBITDA margin assumption to 9.5%-10.5% for 2020 from 8.5%-9.5% (still below 12.4% in 2019) based on rent concessions provided by airport operators and a move toward 100% commission-based rent. We project that CTG's debt leverage will drop below 3x by the end of this year. - We continue to view China Travel Service (Holdings) Hong Kong Ltd. (CTS HK) as a core subsidiary of CTG. The ratings and outlook on CTS HK will therefore move in line with those on CTG. - On Sept. 15, 2020, S&P Global Ratings revised its rating outlooks on CTG and CTS HK to stable from negative. We affirmed our 'A-' long-term issuer credit ratings on the companies and the 'A-' long-term issue rating on CTS HK's guaranteed senior unsecured notes. - The stable outlook on CTG reflects our expectation that the company's recovery will accelerate...

Research Update