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CTRP Buying Opportunity? / A Mind-blowing Spin-off / Wasting energy to create energy

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May 15, 2008 – Comments (4) | RELATED TICKERS: CTRP , IACI

Chinese travel agency Ctrip (CTRP) reported its quarterly results after the bell yesterday.  The company beat analysts' estimates on earnings and revenue.  Its earnings rose 52% versus the same period a year ago!  Despite these strong results, it is trading down more than 10% afterhours (see article: China's Ctrip Q1 soars, but quake fears weigh).  What?!?!  Apparently analysts are concerned that China's recent earthquake will hurt its future results.  CTRP did not change its yearly earnings guidance, but said that it is too early what impact the earthquake damage will have.  The company's CFO was quoted as saying "The impact can be significant" in the company's conference call.  I have a feeling that the market may be overreacting to that statement.  Sichuan travel accounts for less than 10% of CTRP's business.  Analysts are afraid that potential Chinese travelers will be unnerved by the quake and decide to cancel or shorten vacation plans.  This might happen in the short run, but if U.S. citizens can shake off September 11th and begin traveling again, I suspect that the Chinese will easily be able to set aside their earthquake fears and continue to travel.  I am a former CTRP shareholder myself, riding it to over a double before selling at some point last year.  The more investment experience I get, the more leery I am about companies with P/E ratios of 75 :).  The stock is still way to rich for my blood, but if you don't mind the lofty price any drop today might make a nice entry point, especially with the Olympics catalyst in the near future.

 

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Ever since reading Joel Greenblat's excellent book You Can Be a Stock Market Genius I have been fascinated by the investment opportunities that spin-offs create.  Naturally it blew my mind when I heard the news that a company was going to do five spin-offs at the same time.  That company is Barry Diller's IAC Interactive (IACI).  After a legal battle, the company finally received approval to proceed with the spin-offs.  It will break up into HSN (home shopping network), LendingTree, Interval International (time shares), its core website business (which includes a million sites including Ask.com, March.com, Dictionary.com, Evite, Citysearch, etc...), and in my opinion the crown jewel Ticketmaster.  A one for five spin-off is a mind-blowing opportunity for people who like this stuff.  Too bad IACI doesn't make any money and most of these businesses suck.  I obviously don't know what the valuations will be like, but at first glance the only one of these companies that I would be interested in is Ticketmaster.  These guys have been ripping me and other people off for years.  They must be able to print money.  Unfortunately, I am so down on consumer discretionary stocks right now that I doubt that I will pick up shares of Ticketmaster in real life after the transaction is complete, but it might make an interesting CAPS play.

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I continue to be very bullish on natural gas.  Sure we have seen its pricespike to this level in the past, but I have a feeling that highger natural gas prices are here to stay now that we have two new significant consumers of it.  The two things that I am talking about are the ethanol and oil sands industries.  Both of these "energy" plays consume (waste?) massive amounts of natural gas to create their end products.  I think that they have raised the floor for natural gas permanently, or at least until the government realizes how absurd its ethanol policy is.  Add the fact that the June 1st start of the hurricane season is rapidly approaching and we may not see the seasonal drop in nat gas prices that I was hoping would create a buying opportunity in a number of stocks in that sector.

Deej

No position in CTRP or IACI 

4 Comments – Post Your Own

#1) On May 15, 2008 at 11:42 AM, madcowmonkey (< 20) wrote:

Agree on the natural gas to stay high. I have also noted the reasons in some posts. With the big oil companies throwing the money at the oil sands and shale, we will see the trend stick it out for a long time. Pollution is really going to suck then.

CTRP- analysts having issues with an earthquake stopping people from going, yeah right. They are really contemplating all the bad press China is getting for the pollution, the games, and Tibet. They should at least be strong enough to give the correct reasoning for the 10% drop with such a great statement coming out of the company. Think about it, did people stop going to Cali after the earthquakes that they suffered. I don't think so.  

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#2) On May 15, 2008 at 1:33 PM, AnomaLee (28.58) wrote:

"but at first glance the only one of these companies that I would be interested in is Ticketmaster.  These guys have been ripping me and other people off for years.  They must be able to print money."

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LOL, I've wondered the same thing. Do you know who owns stubhub.com? I don't know how far along they in growth since I haven't looked at any figures, but I'd assume the same for them...

I'm glad someone else is bullish on natural gas as well... 

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#3) On May 15, 2008 at 2:10 PM, GS751 (27.37) wrote:

CTRP is interesting I am starting to look at Chinese ADR's but many of the valuations are pretty rich.  A couple of guys I work with represent the biggest natural gas traders by volume, they do about 3 - 5% of the daily volume on all the gas that runs through the henry hub.  I have seen a lot of their research and they are very bullish over the next 2 - 3 years on natural gas. 

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#4) On May 15, 2008 at 3:18 PM, TMFDeej (99.41) wrote:

Yeah, CTRP is too expensive for me GS.  Interesting comments on nat gas.  Out of curiosity, what reasons do your friends list for being bullish on it?  Thanks.

Deej

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