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Tuesday November 24, 2009
Two favorites in China travel sector
In his The Cabot Top Ten Report, he takes a look at hotel stock Home Inns (NASDAQ: HMIN) and Ctrip.com (NASDAQ: CTRP), a Chinese online travel agent. "Ctrip.com is la Chinese online search enginethat has taken a U.S. Web business (in this case Expedia) and translated it to suit Chinese tastes. "The company started by aggregating hotel vacancies and offering them online at a discount. Now, Ctrip.com has broadened its offerings to include airline tickets and packaged tours inside China. 
"Business has been great, as reflected in the company’s Q3 earnings report of a 52% jump in earnings and a healthy 39.5% after-tax profit margin. As much as Ctrip.com has grown since its 1999 incorporation, there’s plenty of room for growth in the robust growth environment of China. "CTRP has had a great run since it bounced off its March low, soaring from 20 to over 70 with only three dips to its 50-day moving average (or a little below it in the October correction) and a nice gap up after Q3 earnings on November 11. "The stock has outrun its moving averages (the 25-day is back at 61) and will likely need some time to let the averages catch up. A dip to 68 would make an admirable entry point, although any dip below 70 would work. "Shanghai-based Home Inns operates a combination of company owned and franchised hotel location. It is is the biggest hotel chain in China, but there’s lots of room for growth. "The situations of the U.S. in 1952 and that of China in 2001 are similar in one very important way. Both were huge prosperous countries with growing middle classes and rapidly improving highway systems. "In both cases, a nationwide string of standardized hotels grew up to feed the need of the traveling vacationer and businessperson. In the U.S., the result was the network of Holiday Inns. In China, it’s Home Inns & Hotels Management. "Its locations offer a controlled set of amenities like air conditioning, water coolers and lots of other niceties that can’t be taken for granted in China. "The company’s earnings report on November 9 featured a 107% jump in earnings on a 38% gain in revenue, which investors appreciated. HMIN spent much of October building a base at around 32, before the late-October broad market decline that pulled lots of stocks down. "HMIN pulled back to 26, then began to rebound into November. The stock gapped up from 32 to 36 after its November 9 earnings report and has been holding firm at about 35 while it consolidates its gains. A dip to 34 would provide an advantageous buy point." |
News Flash
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"The Chinese people’s growing appetite for travel is a big story and it has put two Chinese stocks into our current list of our top ten stock ideas," says technical and fundamental stock expert