1H17 results beat expectation
　　China Travel HK announced its 1H17 results: revenue wasHK$2.4bn, up 29% YoY; net profit was HK$375mn, up 39% YoY,or HK$0.07 per share. 1H17 results are higher than weexpected, thanks to the strong performance of the hotelbusiness and less headquarters expenses.
　　Travel agency: profit stayed flat at HK$66mn. Touristattraction: revenue grew 50%, mainly due to the tourism realestate revenue recognition in Zhuhai and Anji. Net profit fell 6%to HK$71mn. Hotel: profit grew 58% YoY to HK$69mn, thanksto the recovering Hong Kong and Macau tourism markets.
　　Trends to watch
　　Plans to dispose of low-performing assets which areincompatible with its strategy or have poor returns. The disposalof the Mong Kok travel agency store property is in process.
　　Potential asset operations may help improve asset returns andbecome important catalysts for the stock price.
　　Tourism projects expansion expected to accelerate. Thecompany plans to cooperate with local government to developlocal tourism projects by leveraging its operation experience andsufficient funding. This may become a future growth engine forthe company.
　　Earnings forecast
　　Considering robust growth in hotel business, we lift 2017e netprofit by 17.5% to HK$521mn, and 2018e by 22.2% toHK$575mn.
　　Valuation and recommendation
　　The stock is trading at 21.7x 2018e P/E. We maintain ourHOLD rating, but lift our target price by 1.6% toHK$2.64. Our TP is based on 25x 2018e P/E.
　　Risks
　　Execution of new strategy slower than expected.