Sold half of Ctrip
November 2nd, 2007 by MarkThe limit order I made last night filled after I went to bed and I’ve sold half my shares of Ctrip.
| Symbol | Shares | Sale Price | Sale Value | Purchase Date | Cost | $ Gain | % Gain |
| CTRP | 100 | 56 | 5,590 | 05/01/2006 | 2,279 | 3311 | 145.3 |
My reason for this isn’t due to any sort of material change in Ctrips business. I’m still convinced that it’s a wonderful company; it’s a top dog in a growing market with a bright future ahead of it. However, Ctrip’s valuation has gotten pretty rich. Since the time I bought the stock less than a year and a half ago, I’m already up by over 145% after trading costs. It’s an annualized gain of about 88%, and no stock keeps that up for the long haul. The way I see it, Ctrip already has a lot of its growth built into it.
I’ve done a few different models of their future growth, and here’s the more aggressive one: they’ll post 40% earnings growth per year for the next five years. Few companies could do it, but Ctrip has the superb management and the fiscal discipline that might make it possible. If there isn’t any share dilution during this time (which is somewhat unlikely) their EPS would be 3.07 in five years. At the end of this time, Ctrip would be a huge company, and while it could still grow quickly, it’s doubtful that it could fetch the stratospheric P/E valuation it does today. I envision Ctrip as the top dog in a competitive industry, with a substantial moat, so a P/E of 40 is probably reasonable. This would put Ctrip at $122.6 per share by the end of 2012. That would be a 119% gain over five years– 17% a year.
(0.57)*1.4^5*40=122.6
(122.6/56)^(1/5)=1.17 (17% growth)
That 17% a year growth rate would be much better than the market as a whole, but it relies on a lot of ifs. That’s why I’ve decided to sell half my position and pay down my margin balance.
10/31/2007 14:15:04 Sold 100 CTRP @ 56
Legal Disclaimer: All of the information in this article is accurate to the best of my knowledge. However, I make no guarantee about the accuracy of anything written above. I’m not responsible for any mis-typings, or any other errors in the information. If you purchase any stock solely because I did, you do so at your own risk.
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November 2nd, 2007 at 6:11 am
You’re a fucking genius. Apple, Baidu, Chipotle, Ctrip…
I put almost my whole savings into Baidu when you recommended it a couple years ago. That 10K is now worth over 50K and I also bought some other companies you’ve analyzed like Ctrip and Chipotle. Kicking myself for not getting into Gigamedia though.
What do you think about Suntech? You mentioned it twice but you haven’t written a purchase post yet.
November 2nd, 2007 at 8:19 am
Go Mark Go!
November 2nd, 2007 at 4:02 pm
Unfortunately, I wasn’t genius enough to buy Baidu back when I analyzed it. I procrastinated until the price had doubled and then I wasn’t sure if it was still worth it. All in all my investments have been doing great, but Baidu is definitely the one that got away.
I still like Suntech the company, but I’m not sure about the price anymore. It’s doubled since I almost bought it.
November 4th, 2007 at 4:50 am
Hmmm… I remember Brendan having a really bad experience with CTrip botching a trip of his. I also tried using them a while ago to book a ticket to Australia this Christmas, but *could not use their site*. Their system kept insisting there were “no available tickets”, leaving me baffled as to whether the flights on those days were FULL, or whether there simply weren’t flights on that particular day.
Every error message invited me to call them at their call center, to book through a person. In which case what is the point of having a website anyway? Echo insisted that they DID have tickets, but were holding them off-market to auction off at higher prices later.
I ended up booking directly on Quantus, and for less money than I was expecting (prepared) to pay (7000 round trip). So while ctrip might be doing decent work domestically, their international airline sales are embarassing. The experience also made me skeptical of the entire e-business. As airlines get better at online sales and judging customer’s price thresholds, there’s little reason for these sorts of discount distributors to exist. They’re an online extension of an outmoded business (travel agencies as third-party distributors) and airlines will eventually sidestep them.
November 7th, 2007 at 4:30 am
Travelyan,
I appreciate such a detailed comment from someone with experience using Ctrip. Their strength is definitely the domestic market. From what I’ve read one of the biggest drivers in their growth is their vast web of connections with hotels, and various traveler-oriented services throughout China. The hassle of trying to navigate through that mess in unfamiliar cities is a big reason why so many Chinese people rely on Ctrip. I suppose airlines could do the same, but it’s also possible they’ll end up paying Ctrip for access to their database.
I don’t have the kinds of first hand experience with Ctrip that you do, but I would be shocked if they didn’t manage at least 25% annualized sales growth over the next 5 years. They have a sizable moat separating them from their closest competitor, eLong. That said, I did still sell half my position.