Ctrip.com International, Ltd. – One-stop travel company with addressable global market September 20, 2019 76

  • Ctrip reported 2Q19 net revenue of RMB 8.7bn, up 19% YoY – of which accommodation reservation revenue increased 21% YoY to RMB 3.4bn, and packaged-tour revenue increased 25% YoY to RMB 1.1bn.
  • 2Q19 gross margin was flat at 79% as compared to 80% in 2Q18.
  • We are positive on Ctrip due to the large addressable global online travel agent market, its leading position in China and unique core competencies. Ctrip currently trades at P/E of 36.8 and P/B of 1.2.

Company Description:

Ctrip.com International, Ltd. is a leading provider of online travel and related services, including accommodation reservation, transportation ticketing, package tour and in-destination services, corporate travel management, and other travel-related services.

The family of travel brands mainly includes: Ctrip, a leading provider of online travel and related services in China; Qunar – a leading online travel agency in China; Trip.com – an online travel agency for global consumers; and Skyscanner – a leading global travel search site. The Company has gone through rapid growth since its inception in 1999 and became one of the largest travel service provider in the world.

 

Why we like Ctrip:

The large addressable global market with low penetration rate. According to the World Travel and Tourism Committee’s research, 2018’s total global tourism consumption reached USD 5,465bn; of which bookings of the top three OTAs accounted for only 5% of worldwide travel spend.

Ctrip acquired Skyscanner on November 2016. Based on data from google trends since Ctrip’s acquisition of Skyscanner, Skyscanner retained its position as the top two most popular travel brand search platforms in the world, giving Ctrip valuable access to the global online travel agent market. In 2Q19, revenue from international business accounted for more than 35% of total revenue, and Ctrip estimates the international business to grow even faster 40-50% YoY in next few years because of the ever-growing MAU of Skyscanner and Trip.com.

Ctrip the most popular online travel agent in China. According to Ministry of Culture and Tourism of the People’s Republic of China, 2018’s total China tourism consumption reached USD 1,000bn. OTA accounted for 16% of China’s total travel spend, of which Ctrip accounted for around 63% of the online market share.

 

Concerns we have:

Hong Kong and Taiwan disruptions. The majority of the top-line impact comes from Hong Kong’s disruption and China’s cessation of individual travel permits issuance to Taiwan for citizens in 47 mainland cities from August 2019.

Ctrip estimate 4-5% decrease in contracts to drag 3Q’s revenue, given HK and Taiwan represented approximately 1/3 of total Chinese outbound trips (outbound travel accounted for 12.6% of the entire Chinese trip).  

 

Recommendation

We are positive on Ctrip due to the large addressable global online travel agent market, its leading position in China and unique core competencies. Ctrip currently trades at P/E of 36.8 and P/B of 1.2.

 

Technicals:

 

Periods = 14

Red line = 80 Overbought line

Green line  = 20 Oversold line

 

Red line = 3 % K line

Blue Line = 3% D line

 

Relative Strength Index

Support 1: 30.28                     Resistance 1: 40.90

                                                   Resistance 2: 46.27

 

Ctrip.com (US: CTRP) current price action suggests that the stock may enter into a bullish breakout based on the technicals indicated below:

  • Falling Wedge formation signifies a bullish reversal.
  • Strong area of rebound at 78.6% Fibonacci retracement of 25.93 – 46.27.
  • Stochastic Overbought crosses.
  • Bullish Divergence happen as shown on the stochastic oscillator.

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