Ctrip Proposed Issuance Of $500 Million Senior Notes

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Ctrip.com International Ltd. (NASDAQ: CTRP), a travel service provider of hotel accommodations, airline tickets and packaged tours in China, was one of the few stocks in the US internet industry to gain close to 3% yesterday. The company had proposed to offer up to $500 million in aggregate principal amount of convertible senior notes due 2018. The notes will be convertible into Ctrip's American depository shares ("ADSs"), each representing 0.25 of an ordinary share of Ctrip. The Company intends to use a significant portion net proceeds from this offering for other general corporate purposes, including working capital needs and potential acquisitions of complementary businesses.

Ctrip is an all-round performer, with consistent increase in net income (in $ terms). The company’s margins have also been increasing from 2009 onwards. It had increased from 12.9% in FY’09 to 21.0% in FY’12. Prior to 2009, Ctrip was still reporting losses. If you are thinking how Ctrip turned around during 2009, when recession was at its peak - it is primarily due to reduction in Research and Development expense (both as a % of revenues and in absolute $ amount). During FY’12, the company had close to $1 billion in cash portraying a solid position given the company’s opportunity to grow inorganically.

We at Amigobulls have been positive about Ctrip as an excellent investment opportunity. Over the past three months, the stock has gained close to 73.3%. We had loved the stock because at a time when other travel companies like Expedia (NASDAQ: EXPE) seem to find the going getting tough, Ctrip has recorded nothing short of a record second quarter with a 28% Y/Y revenue jump accompanied by a  8% Y/Y increase in Earnings per Share.

Other main competitors like Qunar.com, eLong, etc. might pose a threat to Ctrip. However, given the increasing tourism spend in China, the industry is all poised to witness an all-round growth. With respect to competition, it was observed in the past that Ctrip had faced intense pricing competition and emerged as a successful player. The main advantage is that Ctrip’s price reduction was accompanied by great volume growth resulting in revenue growth which helped the company earn more profits. We continue to hold this stock in our positive watch list given its historical financial performance and its capability to grow.


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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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