CTRP: another solid Q, 08 estimate now in play.

CTRP is an online travel consolidator in China. We have initiated this stock in March of 06 at the price of $39.5. At today's closing price of $78.07, the stock is posting a great return of roughly 100% gain in 14 months. As you recall, this stock is the top pick for our group for 07. And in every ways, I am very pleased with its performance.

Previous investment comment on CTRP is available in these articles. http://www.investorhives.com...
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Essentially our investment thesis on CTRP is the rapidly growing Chinese travel market. Currently online travel consolidators are getting less than 5% of the travel market in China. As the market grows and as online travel consolidators start to command larger percentage of the overall market, we saw big opportunity in CTRP. As I have stated in above articles, I have been very bullish on the company with my last statement outlining possible $88 TP.

Yesterday's solid earning does nothing but to reinforce this belief. CTRP reported impressive revenue growth in all business lines. Considering that Q1 is a traditionally slower Q for CTRP, given the Chinese holidays shutdown, the company still generated 40% YOY growth in Hotel business. Hotel business is now heading into seasonally strong Q2 and Q3 so CTRP is likely to undergo brisk growth in this line of business. CTRP's air-ticketing business grew by eye popping 75% YOY and 6% QOQ growth. With transition to e-ticketing largely behind the company, this business segment growth could accelerate. Packaged tour business is currently a very small portion of the overall CTRP business, accounting for only 6% of the total revenue. But the growth is nevertheless at very healthy rate of 73%. Gross margin inched now to %79.1% from 79.9%. Over last 4 Q's, the gross margin seemed to have stabilized between 79 to 80% range.

It looks like CTRP is now growing at a rate between 35 to 40%. Thus, many analysts are starting to bump up the 08 revenue estimate to $180 to $190 mil range and EPS estimate to $2.2 to $2.4 level. As we are heading into the second half of 07, 08 estimates will be in play for CTRP for determining the proper stock valuation. Given that CTRP has duopoly in huge China online travel market and continues to gain market share from eLong, PE multiple of 35 appears to be reasonable. Based on the fact that revenue growth rate is expected to be in the range of 35% over next 2 to 3 years, this PE multiple assumes PEG ratio of roughly 1. This valuation model continues to point to the further upside of the stock price to near $90 level. I continue to stock with my most recent TP of $88. Smith Barney this morning bumped up its TP for CTRP to $84 from $62 after solid earning call yesterday.

I continue to believe in the business fundamentals for CTRP and I continue to see upside for CTRP despite stunning percentage rise in CTRP share price.


The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)

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