Charm Zone Travel Stock Analysis

Charm Zone Travel Stock Analysis

Introduction

Charm Zone Travel is a travel agency with a unique approach compared to its larger counterparts like Hana Tour and Mode Tour, which operate through both direct and agent sales. In contrast, Charm Zone Travel focuses solely on direct sales. The company, along with other travel agencies, experienced a significant drop in stock prices following the outbreak of COVID-19. However, during the 2021 bull market, there was a considerable recovery, followed by a steady decline.


Major Shareholder

The major shareholder of Charm Zone Travel is Samchuly Bicycle. During the pandemic, there were rumors about a potential sale of Charm Zone Travel, but these did not materialize into actual transactions.

Business Report Insights

Upon reviewing the company's business report, it becomes evident that Charm Zone Travel does not own buildings or inventory, simplifying its financial analysis. The company's revenue streams include travel package sales, flight ticket sales, and related fees. Notably, Charm Zone Travel managed the tour during the 2019 Hungary river cruise disaster. Their competent crisis management during this event has left a lasting positive impression. Although the legal proceedings related to this incident are still ongoing, the company has accounted for the related costs.

Financial Statement Analysis

Balance Sheet

  • Assets: KRW 138 billion
  • Liabilities: KRW 56.5 billion
  • Equity: KRW 81.4 billion

Charm Zone Travel maintains a low debt ratio of around 40%, indicating sound financial management. Although travel agencies typically classify prepaid amounts as other liabilities, Charm Zone Travel's stable operations are particularly appealing.

Income Statement The travel industry operates on the principle that while some people may never travel, those who do rarely travel only once. This implies a recurring customer base. With the end of the COVID-19 pandemic in 2022, it is expected that those who traveled in 2023 will likely travel again in 2024. Given this optimistic outlook, the company is projected to achieve a revenue of KRW 60 billion and an operating profit of KRW 10 billion in the current year. The current market capitalization is KRW 110 billion, which is approximately 10 times the projected operating profit for the year, suggesting a reasonable valuation. Any increase in operating profit would further enhance the company's attractiveness.

Market Sentiment

The current stock chart indicates that individual investors have largely exited their positions, with recent buying activity driven by institutional investors and foreigners. This trend suggests a favorable environment for phased buying strategies.

Investment Ideas

  • Stable operations
  • Sufficient cost reduction
  • Anticipated recovery in travel demand post-COVID-19, making Charm Zone Travel a promising stock in the travel sector

SWOT Analysis

Strengths:

  • Major shareholder stability
  • Financial stability akin to internet-based operations like Kakao Bank and Ebest Investment & Securities
  • Adequate crisis management, as demonstrated during the Hungary river cruise incident

Weaknesses:

  • Potential neglect due to being a small-cap stock

Opportunities:

  • Increasing travel demand

Threats:

  • Overshadowing by larger travel agencies
  • Potential lower-than-expected travel demand

Scenarios

Positive Scenario:

  • Revenue: KRW 80 billion
  • Operating Profit: KRW 15 billion
  • Market Capitalization could reach KRW 200 billion (potential 100% increase) due to increased travel and peak performance.

Negative Scenario:

  • Slower revenue recovery: KRW 30-40 billion
  • Operating Profit: KRW 5-6 billion
  • Market Capitalization could drop to KRW 50 billion (potential 40% decrease) due to incidents or lower demand.

Conclusion

While my honeymoon to France was an independent travel experience, package tours remain popular, especially among retirees. Additionally, there's a growing trend of opting for international destinations like Japan over domestic trips to Jeju Island. Given the diversification in travel demand, choosing a stable company like Charm Zone Travel, which can benefit from increasing travel demand, seems prudent.

Keywords

Charm Zone Travel, travel agency stock, COVID-19 impact, financial analysis, debt ratio, operating profit, travel demand recovery, SWOT analysis, investment strategy, market sentiment.

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