Tag Archives: Expedia

We’re getting a bit more clarity on Qunar, the online travel site that made headlines last June when it received a major investment from search leader Baidu (Nasdaq: BIDU), following the release of some new financial data showing a company that looks quite intriguing and potentially positioned to soon challenge eLong (Nasdaq: LONG) for the place as the sector’s second largest player. I’ll be the first to admit I was a bit skeptical when Baidu forked out a hefty $300 million for an unspecified stake in Qunar last year, assuming the stake was probably a minority interest and also unconvinced about the wisdom of investing in an area so far removed from Baidu’s core search business. (previous post) But now Chinese media are reporting that according to a Baidu filing with the US securities regulator, it actually purchased 62 percent of Qunar in the transaction, making it the company’s major shareholder. (Chinese article) Some quick math will show that investment values Qunar at just under $500 million. A further look will show that eLong, which I’ve long considered an industry laggard, also has a market capitalization in the same range, at just over $500 million. eLong also made headlines last November when longtime minority investor Expedia (Nasdaq: EXPE), a top US online travel agent, paid a hefty premium to boost its stake to a majority share. (previous post) But after rallying on the news, eLong shares have since given back nearly all of their gains and now trade at about $15, far below the $23 per share that Expedia paid to boost its position. All this reflects the reality that despite its longtime presence in the industry and Expedia ties, eLong has failed to ever bridge the large gap between itself and market leader Ctrip (Nasdaq: CTRP), whose market capitalization of around $3 billion means investors think it is worth six times as much as eLong. Founded in 2005, Qunar had revenue of about $23 million and a profit of about $420,000 from the time of Baidu’s mid-year purchase of its controlling stake, according to the newly released data. That would translate to annual revenue of about $46 million and a profit approaching $1 million, versus eLong’s $93 million in revenue and $6.2 million in profits last year. So clearly eLong is more profitable and twice the size of Qunar in terms of revenue; but eLong was also founded in 1999, meaning it had a 6 year head start over Qunar. Based on Qunar’s valuation from the Baidu deal and eLong’s inability to become bigger and pose a more serious challenge to Ctrip, I would say that Qunar looks like a company to watch closely, especially following the Baidu tie-up which could see it use Baidu’s hugely popular search and other sites to boost its position. If things proceed smoothly, I wouldn’t be surprised at all to see Qunar pass eLong in terms of revenue in the next 2 years, with a potential IPO for the company also possible in that timeframe.

Bottom line: New financials for Baidu-invested online travel site Qunar show a company poised to make a potential IPO and challenge eLong for the sector’s number-two spot in the next 2 years.

Related postings 相关文章:

◙ Baidu’s Takes a $300 Mln Spin on Travel Market 百度斥资3亿美元进军旅游市场

◙ Expedia Boosts China Ties, Watch Out Ctrip Expedia增持艺龙股份携程要小心了

◙ 360Buy Losing Focus With Travel Plan 京东商城涉足在线旅行服务业 偏离核心业务

Ctrip (Nasdaq: CTRP) has just released an earnings report that has left investors unsure of what to think of this travel bellwether, though I’m guardedly encouraged by signs that show it is preparing for a future of growing competition. Its latest results show that revenue grew 18 percent in the fourth quarter and is expected to maintain that rate in the current period, but that operating and net profit both fell by similar amounts — not exactly encouraging signs for an industry leader. (company announcement; Chinese article) The culprit behind the so-so results seems to be ballooning  expenses, which rose 46 percent in the fourth quarter due to a number of initiatives, including expansion of the company’s headquarters in Shanghai and procurement of new land in the interior city of Chengdu for expansion there as well. Ctrip also purchased the remaining 10 percent of Wing On Travel it didn’t already own, making it the full owner of the popular Hong Kong travel agency. Investors were a bit unsure what to think of the results, initially bidding up Ctrip shares slightly after the results came out, only to change their mind and ultimately bid the shares down by 1 percent. Clearly no one likes to see revenue growth stalling and profits falling, but I’ve always considered this company a strong innovator and leader in its core travel services space, and its latest jump in costs look to me like it’s making solid moves to build for the future. That could be important, as chief rival eLong (Nasdaq: LONG) saw its longtime stakeholder Expedia (Nasdaq: EXPE) become its controlling stakeholder late last year, indicating the leading US online travel services firm may be preparing an aggressive push into the China market. (previous post) What’s more, another up-and-coming player named Qunar got a major boost last year when it received a $300 million investment from leading online search firm Baidu (Nasdaq: BIDU). (previous post) Ctrip has always been a strong innovator, and its Shanghai and Chengdu expansions reflect its growing needs for workers and space as it adds interesting new products and services to its lineup. I also like the Wing On initiative, as that could position Ctrip for growth in the lucrative Hong Kong market and also provide a springboard into other foreign markets. On the whole, these latest results look relatively encouraging, though Ctrip will need to show that its increased spending can ultimately lead to stronger revenue gains and a return to bottom line growth.

Bottom line: Ctrip’s latest results show a company that is investing heavily for a future of stiffer competition, but it will soon need to show some returns on those new investments.

Related postings 相关文章:

◙ Expedia Boosts China Ties, Watch Out Ctrip Expedia增持艺龙股份携程要小心了

◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

◙ Ctrip’s Latest Initiative: Insurance 携程新举动：保险