Bottom line: A new alliance between some of China’s largest hotel operators is the latest reaction to Ctrip’s growing clout in the travel services sector, and could lead the anti-trust regulator to take remedial action next year.
Hotel operators band together against Ctrip
An increasingly powerful Ctrip(Nasdaq: CTRP) is in the headlines as the new week begins, with word that some of China’s top hotel operators are banding together to protest what they see as unreasonable demands by the online travel services giant. News of this action is once again spotlighting Ctrip’s recent purchase of big stakes in nearly all of its major rivals, in a bid to reduce the rampant competition that has plagued the industry over the last 2 years.
I wrote about this issue just last week, when media reported that Ctrip was in talks to take a stake in travel package site operator Tuniu (Nasdaq: TOUR), one of the few major players that doesn’t have an equity alliance with Ctrip. (previous post) I observed that such a tie-up would help Ctrip by neutering one of its last major domestic rivals. That could ultimately draw the attention of China’s anti-trust regulator, which until now hasn’t taken any action to break-up near monopolies in many of the country’s Internet spaces. Read Full Post…
Bottom line: Ctrip’s recent series of equity tie-ups, including a new rumored deal with Tuniu, could prompt the anti-monopoly regulator to take action to preserve competition in China’s online travel market.
Ctrip eyes new travel tie-up with Tuniu
A strong earnings report from online travel titan Ctrip (Nasdaq: CTRP) and word of a potential new business alliance with a major rival has ignited the company’s shares, which soared 14 percent after it released its latest financials. Ctrip has become a master at the strategic tie-up, buying stakes in most of its rivals over the last 2 years without actually acquiring any of them.
That strategy seems designed to make sure its rivals act more friendly and aren’t competitors, which will help support its profits by reducing the constant price wars that have plagued the industry for much of the last 2 years. The only problem is that such actions have distinctively anti-competitive overtones, and could well draw the attention of China’s anti-monopoly regulator. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 19. To view a full article or story, click on the link next to the headline.
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Tongwei Group Plans World’s Biggest Solar-Cell Plant in Sichuan (English article)
Bottom line: Tencent’s latest plan to invest $1 billion in Meituan-Dianping looks like an awkward bid for control of the newly merged company, which could attract a rival bid from Alibaba.
Tencent as awkward suitor
Social networking giant Tencent(HKEx: 700) has never been very good at public relations, unlike slicker Internet rivals Alibaba(NYSE: BABA) and Baidu (Nasdaq: BIDU), whose founders are much better at wooing the media and investors. That refrain is ringing true once again with the latest mega-investment headlines, which appear to show Tencent making an awkward bid for the newly formed group buying giant created by the merger between former rivals Dianping and Meituan.
In fact, Tencent isn’t really bidding for the new company outright, but appears to be voicing its future intent by offering the merged company $1 billion in new funding. Such a funding would boost Tencent’s current equity in the merged company, in which it already holds a stake following its purchase of 20 percent of Dianping last year for $400 million. Such a bid would seem like a direct challenge to Alibaba, which also holds a relatively large stake in the newly merged company through its participation in a $300 million funding round for Meituan last year. Read Full Post…
Bottom line: Weak share reaction to Ming Yang’s new buyout offer and a low valuation for Giant Interactive’s China backdoor listing reflect weakening investor sentiment towards poorly performing Chinese Internet companies.
Chilly reaction for Ming Yang buyout plan
After a brief period of relative quiet, movement is picking up again in the tide of Chinese companies privatizing from New York to re-list back in China. This time former new-energy high flyer Ming Yang (NYSE: MY) announced it has received a management-led buyout offer, becoming the latest firm to receive such an offer. Meantime in China, one of the earlier firms to privatize, gaming company Giant Interactive, has taken the latest step for a backdoor listing in Shenzhen using a shell company called New Century Cruises. (Shenzhen: 002258).
But in an interesting twist to the homeward migration story, a chilly reception from investors seems to reflecting shriveling interest in these poorly performing Chinese companies. In the Giant story, the proposed new valuation for the company looks quite low — far less than what Giant was worth when it de-listed from New York in 2013. That’s quite a switch from what Giant’s talkative chief was saying just 4 months ago, when he boasted his company might be able to get valued as much as 5 times the $3 billion it was worth when it was still listed in New York. Read Full Post…
Bottom line: Baidu’s new upscale online shopping mall looks more focused and well designed than its earlier e-commerce initiatives, but could have a difficult time finding an audience due to stiff competition.
Baidu tries e-commerce again with upscale mall
Online search leader Baidu(Nasdaq: BIDU) is hoping the third time is the charm for its drive into e-commerce, with the formal launch of its new online mall with a distinctly foreign flavor targeting high-end shoppers. I’ve followed Baidu for a long time now, and the company certainly has a poor track record in e-commerce and more broadly for homegrown initiatives like this latest one called Baidu Mall.
But that said, the company has found more success recently by buying assets outside its core online search area, and then giving them access to its own vast cash and other resources to help them quickly gain market share. Perhaps it’s hoping to use that strategy as well for the newly launched Baidu Mall, even though the platform itself seems to be Baidu’s own creation rather than an acquisition. Read Full Post…
Bottom line: An aggressive new share buy-back and tie-up between its Qunar unit and former rival Ctrip could indicate a new pragmatism from Baidu chief Robin Li, signaling a potential new era of more realistic spending on its emerging businesses.
Baidu jumps on mixed report
Investors hoping for new signs of restrained spending in the latest results from Baidu (Nasdaq: BIDU) were disappointed, as China’s leading search engine continued a recent spending frenzy that has sharply eroded profits. But that didn’t stop those same investors from bidding up Baidu’s shares after release of its third-quarter results, leading me to believe they’re hoping the spending frenzy may soon start to subside. We saw some signs that may be happening earlier this week, following a landmark tie-up between Baidu’s Qunar (Nasdaq: QUNR) online travel site and former archrival Ctrip (Nasdaq: CTRP).
Despite its frenetic expansion outside its core search business over the last year, Baidu remains largely a one-trick pony, deriving most of its revenue from its core online search business. It has found some success in some newer areas, such as online video, travel services and group buying. But the reality is that those businesses are still quite small in terms of revenue contribution, and all are losing big money as Baidu allows them to spend heavily in pursuit of market share. Read Full Post…
Bottom line: The equity tie-up between Ctrip and Qunar is likely to be an uneasy one driven by necessity rather than desire to work together, and stands a 50-50 chance of ending in divorce.
Ctrip, Qunar get hitched … sort of
The year 2015 will go down in Chinese Internet history as the year of the uneasy partnership, as several pairs of former foes suddenly merged even as their outspoken heads refused to work together. The latest of those unions is seeing former bitter rivals Ctrip (Nasdaq: CTRP) and Qunar(Nasdaq: CTRP) get together in a quasi marriage that qualifies as the largest and also strangest union to date.
This particular union isn’t even really a true marriage, and instead is a very big equity swap that will see Qunar’s controlling stakeholder Baidu(Nasdaq: BIDU) get 25 percent of Ctrip. Ctrip will get a larger chunk of Qunar on a percentage basis, ending up with 45 percent voting interest in its former rival. (Baidu announcement; English article; Chinese article) Like the other odd marriages this year, this latest one looks set for troubles, and could stand a very real chance of divorce. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 27. To view a full article or story, click on the link next to the headline.
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Bottom line: LeTV’s latest hired car services investment and high-profile poaching of top talent from a rival look similar to the recent rapid rise and sputtering of Xiaomi, and the company could follow a similar trajectory by this time next year.
LeTV steals top talent from Youku Tudou
After watching the meteoric rise of online video sensation LeTV (Shenzhen: 300104) over the past year, I’m quickly tiring of this company and its hyperactive diversification strategy. The latest move in that drive is taking LeTV onto the road, with word the company is investing a hefty $700 million for a controlling stake of struggling private car services firm Yidao Yongche.
At the same time, other media are reporting that LeTV has just stolen a top executive from chief rival Youku Tudou (NYSE: YOKU), which announced last week it has received a buyout offer from e-commerce giant Alibaba (NYSE: BABA). Anyone feeling a sense of deja vu from these latest 2 LeTV headlines, and from LeTV’s meteoric rise in general, would be correct. Read Full Post…
UPDATE: Since originally writing this post, Internet giant Tencent has launched its own buyout offer for eLong. Ctrip has commented that cooperation with Tencent would represent a win-win. (Chinese article)
Bottom line: Ctrip is likely to make a buyout offer for eLong by year-end, but its profits will remain under pressure for at least the next year as it battles with Qunar for market share.
Profits under pressure at the Ctrip lodge
Leading online travel agent Ctrip (Nasdaq: CTRP) has just released its latest quarterly results that show just how fierce competition has become in China’s travel market, as heavy spending eroded its profits despite big revenue growth. That competition was even more evident in the latest results for eLong (Nasdaq: LONG), which was once Ctrip’s main rival but more recently has developed an increasingly cozy relationship with its former foe.
I’ve been predicting for the last few months that Ctrip will ultimately make a buyout bid for eLong, following a steady series of recent moves that were bringing the companies closer together. The announcement of Ctrip’s and eLong’s latest quarterly results on the same day seems like more than coincidence, and is further evidence that a marriage could soon be coming. But before any formal marriage proposal, Ctrip would also be wise to take a long, hard look at eLong’s financials, which don’t look too impressive. Read Full Post…
