Thursday, May 14, 2009

Ctrip.com (CTRP) - Steady as Always

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Since Ctrip.com (CTRP) came public mid decade I've always had good fortune with this name; there are certain companies in each niche or sector that always seem to fare much better than competition and Ctrip.com seems to be the cream of the crop in Chinese travel. Steady as she goes is the best description ... you can compare it to eLong (LONG) which is like CTRP's wayward little brother that can never learn to walk straight.

Ctrip.com was blown up on "not good enough" guidance back in November [Nov 18, 2008: Not a Good Week for Chinese "Dot Coms"] but at that point anything that walked was getting whacked. This stock always seems to react violently, up or down, post earnings. I closed out our position in early September in the mid $40s - as with everything else it was trashed in the fall and late winter, but after a solid earnings report it made it back to $42 Tuesday before dropping back to the mid $30s. The one issue I've always had with the stock is a premium valuation and already we are back at 35x forward earnings for 2009.

Quick summary via AP
  • U.S.-traded shares of Ctrip.com International Ltd. soared Tuesday after the China-based travel services provider posted solid results for the first quarter. The company late Monday announced quarterly net income of $18 million, or 26 cents per American Depositary share, up 23 percent from a year earlier. Excluding stock options costs, the company earned $22 million, or 32 cents per ADS.
  • Revenue rose 18 percent to $59 million.
  • Hotel reservation revenue rose 9 percent during the quarter to $27 million, while airline ticketing revenue grew 16 percent to $27 million.
  • Ctrip expects second-quarter revenue to grow about 10 percent to 15 percent from a year earlier.
A few of my own observations - Full report here
  • Gross margins held in pretty well at 78% this year versus 80% last, but operating margins jumped 2 % to 34% year over year... unless you include stock based compensation (which we pretend doesn't count in America) so in that case operating margins were 40% versus 42% a year ago.
  • The company benefited from some nice tax "changes": The effective tax rate for the first quarter of 2009 decreased to 18%, as compared to 28% in the same period of 2008 due to the application of the High and New Technology Enterprise ("HNTE") preferential treatment to certain of Ctrip's PRC subsidiaries.
Essentially the company is two big pieces (hotel reservations, airline ticketing) and one small piece (packaged tours)
  • Hotel reservation revenues amounted to RMB187 million (US$27 million) for the first quarter of 2009, representing a 9% increase from the same period in 2008 primarily driven by a 17% increase in hotel room reservation volume, which was partially offset by a decrease in commission per room. Hotel reservation revenues represented an 11% decrease from the previous quarter primarily due to decreased hotel booking volume during the Chinese New Year holidays.
  • Air-ticketing revenues for the first quarter of 2009 were RMB184 million (US$27 million), representing a 16% increase from the same period in 2008 primarily driven by a 40% increase in air-ticketing sales volume, which was partially offset by a decrease in commission per ticket. Air-ticketing revenue increased 11% from the previous quarter primarily due to increased air-ticketing volume.
  • Packaged-tour revenues for the first quarter of 2009 were RMB38 million (US$6 million), up 41% from the same period in 2008 and 25% from the previous quarter, primarily due to the increased leisure travel volume in the first quarter of 2009.
Ctrip.com International, Ltd. is a leading travel service provider of hotel accommodations, airline tickets and packaged tours in China. Ctrip aggregates information on hotels and flights and enables customers to make informed and cost-effective hotel and flight bookings. Ctrip also sells packaged tours that include transportation and accommodations, as well as guided tours in some instances. Ctrip targets primarily business and leisure travelers in China who do not travel in groups. These travelers form a traditionally under-served yet fast-growing segment of the travel industry in China.

[Aug 14, 2008: Interesting Stock Reaction to Ctrip.com's Report]
[May 15, 2008: Ctrip.com Down on Earnings - I'm Buying]
[Feb 28, 2008: Ctrip.com Continues to Impress]
[Jan 5, 2008: Zachstocks on Ctrip.com]

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