Songcheng Performance Alert:The new project in Xi’an ahead in 2019E

What’s new? Songcheng announced to set up new project in Xi’an

    In April 6, Songcheng Performance announced its plan to set up a culture andarts project in Xi’an with a total investment of c. RMB700million. Thecompany also disclosed the location of the project (west side of the DamingPalace National Heritage Park) and the project content including:

    A top notch theatre with 3,000 to 4,000 seats and the large performanceshow called The Romance of Xi’an (西安千古情)

    A square for daily culture and performance shows

    Tang dynasty theme park with facilities of shopping and entertainment

    Science and technology museum and other Sightseeing relatedaccessoriesAs per the announcement guided, Xi’an project will start construction in 2H17and start operation within 18 months.

    DB view: We expect Xi’an project to be the second Hangzhou Songcheng

    We believe in the long run, Xi’an project will gradually have the same impacton the company’s offline business as Hangzhou Songcheng. According to thedisclosed project content, we believe we can value Xi’an project just as thecopy of Songcheng’s Hangzhou base model. This is mainly due to 1) sameproject content, 2) close tourists traffic volume between two cities and 3)similar ancient cultural theme.

    Xi’an attracted a total tourist’s traffic of c. 120m in 2015 and c. 150m in2016 (vs. Hangzhou’s traffic of c. 126m in 2015 and c. 140m in 2016).

    Xi’an is a city with rich and culturally significant history, which is famousfor its Tang dynasty culture. Note that Hangzhou Songcheng isconceptualized upon the painting of Riverside Scene in Song Dynasty.

    Currently, Xi’an has two cultural shows The Long Regret and Dreamingback to Tang Dynasty with similar ticket price of c.RMB200To recall that Hangzhou Songcheng’s topline was RMB688m in 2016 andRMB701m in 2015. It attracts 3.45 million visitors in 2015 and c.3.38millionvisitors in 2016 (no disclosure on 2016 Annual Result, but we estimate thisnumber based on its ASP of RMB203 in 2015). The historical data implies thatHangzhou Songcheng attracts c. 2.5% of Hangzhou total tourists traffic. Dueto the current two shows’ competition in Xi’an, if we estimate 1% of totaltraffic visiting, Xi’an project will bring c.RMB280m revenue in 2019E.