Bottom line: HNA’s purchase of a stake in a small US hotel chain could presage a larger buyout bid for the company in partnership with a Chinese operator looking to expand abroad.
HNA checks in to Red Lion
We’ll take a break today from all the recent mega-deals involving Chinese firms, and focus our attention on a much smaller hotel purchase by private equity high flyer HNA Group. Frankly speaking, I find this new investment in US hotelier Red Lion Hotels (NYSE: RLH) a bit puzzling, as the actual size of the deal is very small and hardly worthwhile for a leading Chinese private equity investor like HNA. But that said, global real estate and hotels in particular have emerged as a hot commodity for big Chinese investors over the last year, meaning this particular deal could presage a larger purchase in the sector by HNA as it tests out the market. Read Full Post…
Bottom line: A new management-led privatization bid for Homeinns and many other similar recent plans could stand a 50-50 chance of failing if they don’t complete the process before China’s stock market rally ends.
Homeinns joins privatization queue
Leading budget hotel chain Homeinns (Nasdaq: HMIN) has become the latest US-listed Chinese company to receive a buyout offer, capping a record week that has seen at least 4 such bids. In the past, 4 privatizations in a 6-month period would be considered big, even though such bids have been coming at a slow trickle over the last 3 years for Chinese companies whose shares have languished on Wall Street. But that tickle has turned into a flood these last 2 months, fueled mostly by greed, as company owners look enviously at China’s rallying stock markets that have more than doubled over the last year. Read Full Post…
Bottom line: Qunar’s latest quarterly results show it will continue to spend aggressively and post big losses as it competes with Ctrip, and reflect the fact that its biggest asset is its majority ownership by the cash-rich Baidu.
Qunar spurns Ctrip, raising cash
China’s highly competitive online travel landscape is rapidly shaping up as a two-horse race, with one group centered on industry leader Ctrip (Nasdaq: CTRP) and the other on up-and-comer Qunar (Nasdaq: QUNR), which is controlled by leading search engine Baidu (Nasdaq: BIDU). After Ctrip announced a flurry of major new tie-ups last week, Qunar is fighting back with new fund-raising announcements that include a nearly $1 billion cash injection through the issue of new stock and bonds.
Qunar announced the fund-raising the same day that it released its latest quarterly results, which contained the surprise disclosure that it was approached by Ctrip last month about a merger. It added that it rebuffed the advance, but it clearly needs new funds as its own cash pile remains relatively small and its losses balloon due to aggressive spending. Read Full Post…
Bottom line: Priceline’s new China foray with Ctrip will get off to a positive start, but will run into problems and ultimately collapse due both sides’ inability to gain much from the partnership.
Ctrip boosts Priceline alliance
Just days after global online travel giant Expedia (Nasdaq: EXPE) announced its withdrawal from China, rival Priceline (Nasdaq: PCLN) is moving in the other direction with a significant boost to its partnership with local sector leader Ctrip (Nasdaq: CTRP). I’ve previously been quite skeptical of this particular partnership, after previous similar tie-ups failed due to the fiercely independent nature of Ctrip’s top management. I’m still quite skeptical, though a string of other major tie-ups by Ctrip recently seem to show it’s realizing it needs to be more flexible to fend off the growing threat from fast-rising local rival Qunar (Nasdaq: QUNR). Read Full Post…
Bottom line: Thursday’s hacking attack on Ctrip brings a sour end to its week of major new tie-ups, but isn’t too unexpected for a company of its size and should have a relatively limited impact on its operations and reputation.
Ctrip shut down by hackers
I’ve been writing a lot about leading online travel agent Ctrip (Nasdaq: CTRP) these last few days after it signed a couple of major deals, so it seems fitting that we end the week with news of a major hacking attack that took the company offline for most of Thursday. I’m a longtime user of Ctrip and am generally a big fan of the company, whose good management and focus on its core travel business have allowed it to maintain its market-leading position for a decade despite numerous challenges.
Against that backdrop, this hacker attack seems like a relatively minor issue, though one that could be potentially worrisome as it exposes one of Ctrip’s biggest vulnerabilities. Then again, Ctrip is certainly not the only company to come under such attacks, and many much larger and more experienced western giants like US retailer Target (NYSE: TGT) and Hollywood studio Sony Pictures (Tokyo: 6753) came under much higher-profile and more damaging outside assaults last year. Read Full Post…
Shanghai may be famous for its entrepreneurial spirit, but its track record isn’t quite so stellar when it comes to nurturing top entrepreneurs. That could be starting to change, however, with word that Dalian Wanda Group, one of China’s most dynamic companies, plans to move its headquarters to Shanghai from its current location in Beijing.
As a longtime foreigner living in Shanghai, I’ve always been surprised by the relatively small number of major private companies for a city of our size. We should certainly be proud of some of our city’s most outstanding entrepreneurs, with names like Guo Guangchang of Fosun Group and Spring Airlines (Shenzhen: 601021) Chairman Wang Zhenghua as 2 outstanding examples. Read Full Post…
Bottom line: The strong reception for Huaitai Securities’ Hong Kong IPO reflects growing international investor appetite for Chinese stocks, which could help to lift shares of New York-traded Chinese companies like newly listed Baozun and eHi.
Baozun turns in choppy IPO
A flurry of IPO news is reflecting the growing attraction of listing closer to home for Chinese firms, whose New York-traded shares have languished these days due to lack of familiarity by local investors. Two new US-based listings have performed reasonably well but not spectacularly, led by modest gains for newly listed shares of web design services firm Baozun (Nasdaq: BZUN) in their trading debut. At the same time, recently listed rental car company eHi (NYSE: EHIC) raised a modest amount of money in a secondary offering, again reflecting tepid investor interest in its story.
While those 2 listings got so-so receptions, the response was far stronger for Huatai Securities, China’s fourth largest brokerage, whose shares priced at the top of their range as Hong Kong investors scrambled to buy into the mainland’s ongoing stock market boom. Read Full Post…
Bottom line: Ctrip’s purchase of a controlling but minority stake in eLong is the latest in a string of similar equity tie-ups by the company, none of which looks very exciting because these new partners aren’t interested in working closely with Ctrip.
Expedia sells eLong stake
A longtime but largely empty cross-border Internet partnership has finally come to an end, with word that US online travel agent Expedia (Nasdaq: EXPE) has dumped its stake in Chinese laggard eLong (Nasdaq: LONG). In an interesting twist to the story, the group buying eLong includes Chinese industry leader Ctrip (Nasdaq: CTRP), which seems to be buying small stakes in many of its rivals these days without buying anyone outright.
Personally speaking, I don’t see much reason to get excited about Ctrip’s latest buy, even though investors seemed to think differently. eLong is a perfect example of a company that had huge advantages due to its early arrival to the online travel market and longtime partnership with Expedia. And yet it failed to parlay any of that into a market leading position, and instead has become an afterthought as it got overtaken by younger, more innovative companies like Tuniu (Nasdaq: TOUR) and Qunar (Nasdaq: QUNR). Read Full Post…
Bottom line: JD.com’s latest results show it could reach profitability on an operating basis later this year, while its new tie-up with Tuniu looks like a well-conceived plan that reflects a growing wave of equity tie-ups among Chinese Internet firms.
JD’s loss narrows, ties with Tuniu
China’s second largest e-commerce firm JD.com (Nasdaq: JD) has been busy wowing investors these last few days, starting with its latest quarterly ressults that shows it is making strong progress in moving towards sustainable profits. Meantime, the company has also become the largest individual stakeholder in online travel site Tuniu (Nasdaq: TOUR) through its participation in a deal that saw Tuniu raise $500 million by selling shares to a larger group of investors.
Wall Street greeted the pair of news stories with mildly positive reaction, bidding up JD.com shares by 2 percent after the reports came out. The stock has rallied nearly 50 percent this year and is 77 percent above its IPO price from a year ago, as investors grow more bullish on this company that is China’s biggest challenger to the much larger Alibaba (NYSE: BABA). Tuniu shares also got a nice lift from the news, rising 4.5 percent. Read Full Post…
Bottom line: Tuniu is likely to quickly resolve a revolt by some of its third-party travel agents, and a sell-off of its shares looks overdone, while Rakuten’s third foray into China could finally succeed thanks to its choice of a more suitable partner.
Rakuten invests in Fanli
We’ll close out this week with a couple of stories buzzing through the Internet realm, led by a travel agent rebellion against online travel site Tuniu (Nasdaq: TOUR). Meantime, Japanese e-commerce giant Rakuten (Tokyo: 4755) is taking its third try at the China market through a new investment in an e-commerce company called Fanli.com, following failed previous forays with leading online travel agent Ctrip (Nasdaq: CTRP) and online search leader Baidu (Nasdaq: BIDU).
These 2 stories are mostly linked by the fact that both involve Internet companies. But in a twist that looks purely coincidental, Rakuten was also one of the earlier investors in Tuniu before the latter made its New York IPO early last year. It’s not clear if Rakuten still holds that stake in Tuniu, but if it does its shares just lost nearly 5 percent after a Thursday sell-off on reports of the merchant revolt. But Tuniu’s shares are about 75 percent above their IPO price, meaning its early investors are still doing quite well. Read Full Post…
Bottom line: A new push into mid-range hotels could provide a boost for Homeinns and other operators, but the relief is likely to be short lived as that part of the market also quickly becomes saturated.
Home Inns goes upscale with new brands
Hotel operators are rushing to fill a relative void in the middle of China’s market, with word that leading budget chain Homeinns (Nasdaq: HMIN) has launched new brands aimed at consumers willing to spend a bit more during their travels. The move looks relatively smart, as growth slows at the top and bottom ends of the market due to overbuilding and a slowing economy that is putting a damper on domestic travel. But Homeinns isn’t the only one to notice this void, and recent similar moves by others could see this middle part of the market also quickly become saturated and oversupplied. Read Full Post…
