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Post-Olympic Win For Ctrip.com Stock?

06/23/2008| 10:07:00 AM| 中文

June 17, 2008,BEIJING -- China's travel industry, which has boomed in recent years, isn't faring as well it had hoped this Olympics year. Still, some analysts think this is a good time to tap into the country's top online-booking provider.

June 17, 2008,BEIJING -- China´s travel industry, which has boomed in recent years, isn´t faring as well it had hoped this Olympics year. Still, some analysts think this is a good time to tap into the country´s top online-booking provider.

Shares of Ctrip.com International Ltd. have been traveling south, so they could present a buying opportunity. In the six weeks ended Friday, the stock has slipped almost 30%. They were down 39 cents at $49.77 in trading Monday on the Nasdaq Stock Market.

But travel in China is expected to keep growing solidly long term, and analysts believe the company is equipped to maintain its lead in the online-reservation business for at least a couple of years.

A number of factors have slowed growth for the domestic travel businesses in China this year. Snowstorms that disrupted train systems during the Lunar New Year break and shorter public holidays since then have reduced hotel and flight bookings. The May 12 earthquake in Sichuan has affected travel around that part of the country.

Also, for Ctrip, the Olympic Games in Beijing won´t be a windfall. The Shanghai-based company makes much of its money from Chinese citizens taking holidays to see their nation, and while many will travel to Beijing during the Olympics, the number of new bookings this quarter isn´t expected to be large, especially as rooms in three-star and higher hotels are scarce.

Ctrip´s business is still growing solidly; it´s just that the pace has slowed. For the three months ending June 30, the company has said it expects revenue to grow 30% from a year earlier. For the quarter ended March 31, Ctrip reported a 47% increase in revenue to $49 million.

Goldman Sachs noted in May that the forecast for the current quarter was scaled down from Ctrip´s "usual 35% year-on-year guidance." However, Ctrip has maintained its forecast that for all of this year, revenue can still rise 35%.

When the Chinese travel industry recovers from blows like the earthquake, Ctrip should be in a strong position to jack up growth because of its lead in the market. The company takes bookings for hotels, flights and travel packages on its Web site and at its call centers, tapping into an increasingly affluent and mobile consumer base.

According to Beijing-based technology consulting firm BDA China Ltd., Ctrip garnered 58% of the Chinese industry´s total online revenue last year, while nearest competitor ELong Inc., majority owned by U.S. media conglomerate IAC/InterActiveCorp, had 14%. (For 2006, the market shares of the two were 56% and 18%.) Mangocity.com Ltd., a subsidiary of China Travel Service (Holdings) Hong Kong Ltd., which analysts say could become Ctrip´s toughest competitor, was in third place last year, with 7%, according to BDA.

Leah Hao, an analyst for Goldman Sachs in Hong Kong, wrote last month that problems affecting the Chinese travel industry are "disruptive near term, but not thesis changing." Her thesis is that Ctrip has good prospects. Goldman has a "buy" rating on Ctrip and a 12-month target of $67.

Not everyone is so upbeat. Right after Ctrip reported its first-quarter results, Ashish R. Thadhani, an analyst for New York-based Gilford Securities, downgraded the stock to "hold" from a "buy" rating it gave in February.
TAGS: Ctrip | Goldman Sachs | BDA China Ltd
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