While the rest of the world is worried about the hard landing of China’s economy, or the bursting bubble of its stock market, Andreas Halvorsen is busy adjusting his fund, Viking Global‘s exposure to the travel industry of the world’s second-largest economy. According to two recent filings with the Securities and Exchange Commission, the fund has decreased its holding in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) by over 60% to 1.68 million shares valued at $122.27 million, while adding some 9.15 million shares to its Qunar Cayman Islands Ltd (NASDAQ:QUNR) holding, lifting the total stake to 10.16 million shares valued at $422.45 million. In Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP)’s case, the stake represents about 5.2% of the company’s outstanding stock, while in Qunar Cayman Islands Ltd (NASDAQ:QUNR)’s case the holding stands at 6.5% of the company’s shares.
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The $10.21 billion company, Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), helps its customers book tour packages and guided tours both within China and abroad. These customers also include corporate clients, whose travel needs are catered by Ctrip. Halvorsen’s move to change focus might have to do with the high valuation of Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP). Currently the stock is trading at an exceptionally high forward earnings multiple of about 56, which is one of the highest among its peers in the lodging industry. Viking Global has held a stake in the company since the second quarter of 2014. The stock has risen nearly 22% since then, which includes a steep rise of almost 60% so far this year. In contrast the lodging industry has only been able to post 9% gains year-to-date.
Viking Global might have been quick to cut its stake in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) as many analysts including Piper Jaffrey and UBS are extremely bullish on the stock, with price targets that respectively offer 56% and 40% upsides to the current trading levels, despite the high valuation. When you take into account that the jump in Chinese passengers in the previous three months was the largest in the last two years and that ticket sales constituted 38% of Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP)’s revenues in 2014, the targets are not so unrealistic. Moreover, the company is also on route to expand its margins, which were previously depressed by management to extend the company’s market share. Now that Ctrip is the second-largest player in the industry and has a 38% stake in eLong, the industry leader, pricing competitiveness could be heading to more profitable levels.
Qunar Cayman Islands Ltd (NASDAQ:QUNR) might be half the size of Ctrip, according to the market values of the two companies, but the company, which is still to turn in a profit, rebuffed a buyout offer from Ctrip this month. Halvorsen’s bet likely indicates that he sees more growth prospects arising for Qunar Cayman Islands Ltd (NASDAQ:QUNR) than its rival, as his position in Qunar is now more than three times as valuable as his Ctrip holding. Viking Global initiated a stake in Qunar during the fourth quarter of 2014. The stock is on a spree of its own, having risen by about 48% year-to-date.
Qunar recently received the final judgment from the Beijing High People’s Court in connection with a dispute with eLong relating to an Inventory Distribution Agreement for hotels. Although the decision wasn’t in favor of the company, it will not have a material effect on its performance, since it had already recorded a one-time loss provision in its financial results for the fourth quarter owing to this lawsuit.
Daniel S. Och‘s OZ Management is the largest stockholder of Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) within our database, holding some 4.64 million shares valued at $272.06 million, while Robert Karr‘s Joho Capital is a prominent stockholder of Qunar Cayman Islands Ltd (NASDAQ:QUNR), with 1.51 million shares valued at $62.23 million.
Disclosure: None
