Bottom line: Ctrip’s offline travel alliance campaign looks like a shrewd move with good chances of success, while Tongcheng’s move back into profits shows the sector is heading into a new stable period.
Tongcheng travels back to profits
A couple of travel-related stories are in the headlines today, led by a blitz into the offline realm by leading online agent Ctrip (Nasdaq: CTRP). The other item has smaller rival Tongcheng reporting its first profit in four years, as it becomes the latest to emerge from a prolonged price war that bloodied the entire industry and sent most companies into the loss column.
Neither of these stories is huge, which partly reflects the fact that this industry is finally emerging from a brutal period to a new one of relative calm. But Ctrip is clearly looking for its next battle front, after consolidating its position by taking over most of its major rivals, including Qunar and eLong, to end the price wars. Read Full Post…
Bottom line: Tongcheng’s merger with Wanda’s travel unit could create a strong new rival to counter Ctrip, and could become even stronger through a potential future tie-up or merger with HNA-backed Tuniu.
Tongcheng merges with Wanda Travel
For more than a year Internet giant Ctrip(Nasdaq: CTRP) has seemed almost invincible, buying up most of its major rivals one by one to consolidate its position as the nation’s leading travel agent. But the company may finally be coming up against a major rival in its bid to dominate the lucrative sector, with word that real estate and entertainment giant Wanda has bought up Tongcheng, one of Ctrip’s last remaining major rivals.
This particular tie-up is slightly unusual, as Ctrip previously invested around $200 million for a stake that was reportedly as high as 30 percent in Tongcheng, according to media reports a couple of years ago. (previous post) That would have valued Tongcheng at about $650 million, which is a fraction of the valuation of more than 20 billion yuan ($3 billion) that Tongcheng was worth, based on the latest investment by Wanda. Read Full Post…
Bottom line: Ctrip’s stock could be set for strong gains over the next 12 months, thanks to strong profit growth following its recent string of equity tie-ups that have neutralized most of its major competitors.
Ctrip neutralizes rivals with string of tie-ups
In this series on my favorite China-concept stocks, leading online travel agent Ctrip (Nasdaq: CTRP) is the only one that I don’t really like in terms of corporate personality. But that fact aside, there’s still plenty for investors to like about this company that has slowly built up an enviable empire in China’s fast-growing market for travel services.
Ctrip was ahead of the curve with its establishment back in 1999 when China’s Internet and travel industry were both in their infancy. It was also one of China’s earliest Internet companies to list in the US, making a New York IPO back in 2003. Since then its prospects have soared with China’s booming travel industry, as the company faced relatively little competition for most of its first decade in business. Read Full Post…
Bottom line: China’s anti-trust regulators need to wake up to the growing clout of big nmes like Tencent and Ctrip in emerging industries and move more aggressively to stop them from engaging in anti-competitive behavior.
iKang accuses rival of monopoly behavior
A war of words broke out last week between two of China’s largest private clinic operators, as one accused the other of violating the nation’s anti-monopoly laws with a recent purchase. The case pitting iKang (Nasdaq: KANG) against larger rival Health 100 (Shenzhen: 002044) casts a spotlight on growing concerns about anti-competitive behavior in China’s vibrant private sector, which boasts many companies whose size is already approaching some of the nation’s largest state-run giants.
And yet despite the size of these companies and increasing cases of anti-competitive behavior, China’s anti-monopoly regulators have largely ignored the domestic private sector, focusing instead on big foreign and state-run firms. The validity of iKang’s accusations against Health 100 still need to be proven, since China’s private clinic sector is still very young and may not have the scale to qualify for monopoly consideration. Read Full Post…
Bottom line: Qunar’s new airline investment is unlikely to offset its shrinking access to tickets from major airlines, while Ctrip’s new purchase of a strategic stake in Uzai.com extends its strategy to eliminate competitors through such tie-ups.
Ctrip invests in Uzai.com
China’s rapidly consolidating travel services sector is taking an interesting new twist onto the runway, with word that number-two website Qunar (Nasdaq: QUNR) is joining a group launching a new airline. At the same time, separate media reports are saying that industry industry leader Ctrip(Nasdaq: CTRP) has just neutered another rival using its recent approach of buying a strategic stake in the company.
Both of these stories point to the growing clout of Ctrip and Qunar, which were once bitter rivals but became a de facto single company last year after a landmark equity tie-up. I have long called for consolidation in China’s highly fragmented travel services sector, but now sense that Ctrip is looking increasingly like a monopoly after its recent buying spree that has seen it buy up strategic stakes in most of its major rivals. Read Full Post…
Bottom line: Shanghai Disneyland’s ticket pricing and proactive efforts to stop scalpers are being well received by media and local Chinese, boding well for a broadly positive launch when the park opens in June.
Shanghai Disneyland prices tickets
It’s still 4 months until Shanghai Disneyland (NYSE: DIS) formally opens its doors to the public, but already the park operator is fixating on its entrance tickets that are almost certain to become a hot commodity when they start hitting the market next month. The announcement of pricing for Shanghai Disneyland tickets, which was quickly followed by measures the company is taking to avoid scalpers, are part of a barrage of hype that will only accelerate as the park charges towards its opening date in mid June.
I’m usually a bit cynical about this kind of thing, since companies like Disney are masters at creating news just to keep their names in the headlines ahead of a big event, even if there’s no real news to report. But in this case the opening of the Shanghai Disneyland really does seem worthy of the buzz, since the new park marks a major milestone for both China and Disney itself. Read Full Post…
Bottom line: Tuniu’s new tie-up with HNA looks like a smart move that could position it as a leading provider of resort vacation packages, and could also signal the rise of a meaningful rival to industry leader Ctrip.
Tuniu travels to Hainan with HNA
Leading online travel site Ctrip(Nasdaq: CTRP) has emerged as the loser in a recent bidding war for a stake in smaller rival Tuniu (Nasdaq: TOUR), which has just announced a new alliance that will see it receive a $500 million investment from one of China’s top traditional travel companies. This latest in a recent flurry of deals from the travel space will see HNA Tourism get about a quarter of Tuniu’s shares for its investment, making it Tuniu’s largest shareholder.
HNA Tourism is a unit of HNA Group, one of China’s more dynamic state-run investors that is also parent of Hainan Airlines (Shanghai: 600221), one of the country’s best-run airlines. Based in the tourism-friendly island of Hainan, HNA certainly looks like a logical and well-connected partner for Tuniu, even though media were reporting last week that the more entrepreneurial Ctrip was in talks for a similar deal. (previous post) Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 24. To view a full article or story, click on the link next to the headline.
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Tuniu (Nasdaq: TOUR) Announces $500 Mln Investment from HNA Tourism (GlobeNewswire)
Alibaba (NYSE: BABA) to Invest $1.5 Bln in Takeout Delivery Platform Ele.me (English article)
Alibaba’s Jack Ma Said to Be in Discussions to Buy SCMP (HKEx: 583) Stake (English article)
Trina Solar (NYSE: TSL) Announces Q3 Results (PRNewswire)
Bank of Jinzhou Starts $943 Mln Hong Kong Initial Offering (English article)
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 August 20. To view a full article or story, click on the link next to the headline.
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Huayi Bros (Shenzhen: 300027), Ping An Bank in 30 Bln Yuan Entertainment Tie-Up (Chinese article)
Lenovo (HKEx: 992) Joins Smartphone Compatriots for ’Make in India’ (English article)
Sina (Nasdaq: SINA) Reports Q2 Financial Results (PRNewswire)
Fund Piles Into Baofeng Tech (Shenzhen: 300431), Becomes Top Shareholder (Chinese article)
Tuniu (Nasdaq: TOUR) Takes Over JD.com’s Online Travel Business After Tie-Up (Chinese article)
