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Coverage Initiation: Ctrip.com International
Ctrip.com International Ltd. (CTRP) recently made its debut in The Value Line Investment Survey. The online travel agency provides services to inbound, outbound, and domestic travelers in the People’s Republic of China. Its portfolio of offerings includes the ability to book hotel rooms, purchase airline tickets, and reserve packaged tours. The company generates revenue by collecting commissions paid by its suppliers.
Ctrip.com was founded in 1999 by James Liang, Neil Shen, Qi Ji, and Min Fan, and later incorporated in the Cayman Islands as Ctrip.com International Ltd. It went public in 2003 by issuing 4.2 million American Depository Receipts at $18.00 per ADR.
Since then, the company has become the leading Chinese travel website with over 40 million registered members, and a network consisting of more than 32,000 hotels. Ctrip has also published several travel magazines and books. And while the company operates mainly in China, it began to expand its business to select cities overseas in 2009.
In recent times, Ctrip has experienced considerable growth due to its close linkage with the Chinese economy, which is thriving. While the U.S. travel industry is just beginning to rebound after the recent economic downturn, tourism in China has increased dramatically over the last few years as personal income levels have risen across the region. In fact, Ctrip has consistently posted operating margins well above those of its U.S. counterparts since its initial public offering. Furthermore, it is likely that the Chinese travel market will continue to expand, leading to even stronger performance for Ctrip.
With a dominant position in China, the company is now looking to expand its presence overseas. Ctrip has pursued several acquisitions lately, including WingOn in Hong Kong and ezTravel in Taiwan, in an attempt to corner the Asian travel market. The company is specifically targeting regions that tend to be of interest to Chinese tourists, which will enable it to reduce costs when booking services for outbound travelers in China.
All in all, Ctrip is very well positioned in its industry, given its strong brand recognition and expanding customer-base. We expect strong performance down the line as the Chinese economy continues to grow, further boosting travel in the region. In addition, by expanding its operations through strategic acquisitions, the company will probably be able extend its dominant reach to other Asian markets.
We believe these shares have good growth potential over the next few years, and probably beyond. In fact, this stock surged recently in response to increased travel in China due to the Shanghai World Expo, the effects of which will probably further spark interest around the globe. Overall, the Chinese travel market is growing at a rapid pace, giving this stock considerable room to run.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.