2016 results in line with expectation
　　China Travel HK announced FY2016 results: revenue wasHK$4bn, down 7% YoY; recurrent net profit was HK$ 413mn,down 34% YoY, or HK$ 0.08 per share. Results are in linewith pre-announcement.
　　Travel agency: profit fell 27% to HK$137mn, due torelated adjustments in visa policy.
　　Tourist attraction: profit fell 37% to HK$123mn, mainlydragged by rainy weather and loss in Zhuhai OSR.
　　Hotel: profit stayed flat at HK$110mn.
　　Trends to watch
　　Earnings may recover from a low base in 2017. As theHong Kong and Macau tourism markets gradually improved, weexpect the hotel and travel agency businesses to recover in 2017.
　　Tourism projects expansion expected to accelerate. Weexpect the company will cooperate with local government todevelop local tourism projects by leveraging its operationexperience and sufficient funding. This may become a futuregrowth engine for the company.
　　Earnings forecast
　　We lower our earnings forecast by 5% from HK$0.09 toHK$0.08 per share for 2017. And we introduce 2018 earningsforecast of HK$0.09 per share.
　　Valuation and recommendation
　　The stock is trading at 28.0x 2017e P/E. We maintain our HOLDrating, but lower our target price by 1.52% to HK$2.60,implying 14.04% upside room from the current price. Our targetprice is based on NAV analysis.
　　Risks
　　Execution of new strategy slower than expected.