Company Profile

China United Travel Company Ltd. operates in the property development and travelindustries. The Company operates travel agencies, provides passenger transportationservices, and develops resorts.Event

China United Travel Co.,Ltd. invested CNY 9 million for 5% stake in Rong Zhi Xun Da(market cap CNY 180 million), a professional VR live broadcasting equipmentmanufacturer and online content sharing platform operator. It promised to sell no lessthan 10,000 VR cameras and made no less than CNY 22.85 million sales revenue in thenext 12 month (CNY 11 million from equipment distribution and CNY 11.85 from onlineshows).Comment

Common customers became able to access VR products in 2012. Since then thebusiness has been developing at fast pace. World IT consultancy institutions forecastedthat China's VR market valued CNY 1.54 billion in 2015 and would reach CNY 5.66 billionin 2016. Scale of the industry may even record CNY 55 billion in 2020, presenting stronggrowth potential. 25 million VR helmets are expected to be sold out five years later(Business Intelligence), which forms a USD 75 billion market (USD 300 each). AndDigi-capital's report reveals that VR content business will enjoys significant developmentin the near future as well(CAGR 130%, USD 150 billion in 2020).

Technical giants around the world are all proactively preparing themselves for the comingVR boom. Rather than primarily applied to video games in foreign countries, VR productsand services gain great popularity through online shows. Rong Zhi Xun Da launched twoonline show platforms that can be logged on from both mobile devices and PCs. Youngmigrants going for their dreams in cosmopolitans in China can communicate with theirpeers via these platform to live a more colorful life. Acquiring VR company alsohelps China United Travel achieve fast growth in other business.

China United Travel is going to operate marketing campaign of 13th Chinese WinterGames and organize sales of naming rights as well as large varieties of licensedproducts with other three partners. In addition, having signed cooperation agreementwith Scenery Culture, it plans to bring out two famous shows in Nanjing and Xiamenfrom 2015-2017. Its scope includes providing funds and negotiating with governmentagencies. Scenery Culture will work out plans and designate cast members as well ascore teams to the two projects. And “Zhaojun Going out of the Frontier” world tour isalso jointly operated by Scenery Culture and China United Travel. Mr. LI Yugang is itschef director and Mr. MEI Shuaiyuan acts as its art director. It took three years to finishthe work. Besides inviting actors of China Opera and Dance-Drama Theatre to giveperformance, the two companies take in many top artists in China in the tour.

Earnings Forecast and Investment Recommendations: we are optimistic about theCompany's strategy in stepping into VR industry and maintain BUY rating for it.

Potential Risks: slower-than-expected progress of projects.