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eLong, Inc. (LONG) and Ctrip.com International, Ltd. (CTRP) are both on-line travel service companies listed on NASDAQ. Both serve China market.
eLong's services include hotel information and reservation services, airline reservations, and ticketing services. The company provides travel information and hotel reservations at approximately 7,000 hotels in 400 cities across China, as well as air tickets in approximately 80 cities through its Websites, a call center, telephone booking services, and a reseller network.
Ctrip.com provides travel services for hotel accommodations, airline tickets, and packaged tours. It also sells independent leisure travelers bundled package-tour products, which include transportation and accommodations, as well as guided tours covering various domestic and international destinations.
eLong is much smaller and its performance has been inferior to its competitor Ctrip.com.
The following are eLONG's annual income statement items (Unit $000).
| PERIOD ENDING |
31-Dec-08 |
31-Dec-07 |
31-Dec-06 |
| Total Revenue |
48,017 |
40,795 |
33,898 |
| Cost of Revenue |
14,229 |
11,309 |
7,976 |
| Gross Profit |
33,787 |
29,486 |
25,922 |
| Net Income |
(11,236) |
(3,508) |
(142) |
The following are taken from CTRP's income statement (Unit $000)
| PERIOD ENDING |
31-Dec-08 |
31-Dec-07 |
31-Dec-06 |
| Total Revenue |
232,809 |
164,383 |
99,990 |
| Cost of Revenue |
63,458 |
32,384 |
19,632 |
| Gross Profit |
169,351 |
132,000 |
80,358 |
| Net Income |
65,095 |
54,605 |
30,840 |
For the third quarter of this year, both performed well, and again Ctrip performed better.
The following is LONG's Q3 results:
Operating income in the third quarter was RMB5.9 million compared to operating loss of RMB19.9 million in the prior year period. Net income in the third quarter was RMB7.5 million compared to net loss of RMB15.5 million in the prior year period.
The company did not announce the earnings per share number. According to Yahoo, the company has 23.58 million shares outstanding. Based upon the RMB5.7 million net income and RMB6.8/USD exchange rate, the estimated earnings per share is about %0.047.
The following is the highlight of CTRP's Q3 results.
Net revenues were RMB545 million (US$80 million) for the third quarter of 2009, up 47% year-on-year. Net income attributable to Ctrip's shareholders was RMB189 million (US$28 million) in the third quarter of 2009, up 80% year-on-year. Excluding share-based compensation charges (non-GAAP), net income attributable to Ctrip's shareholders was RMB215 million (US$32 million), up 59% year-on-year. Diluted earnings per ADS were RMB2.65 (US$0.39). Excluding share-based compensation charges (non-GAAP), diluted earnings per ADS were RMB3.03 (US$0.44).
Future P/E estimation
On 11/25, Ctrip closed at $70.68 and eLong closed at $13.00. If we assume flat earnings per share for the next four quarters, Ctrip's P/E ratio will be %70.68/(0.39*4) = 45.3, and eLong's P/E will be $13/(0.047*4) =69.1.
With economic recovery of China and the world, both businesses are expected to pick up. Based upon Ctrip's Q3 results, earnings per share grew 59% year on year. Converting this yearly growth rate to quarterly growth rate, it is roughly 15% per quarter. This means Ctrip's expected earnings per share will be around $0.51, $0.58, $0.67, and $0.77 for the next 4 quarters, which converts to future expected P/E ratio of 27.94.
Using the same growth rate for eLong, the expected earnings per share will be around $0.05, $0.06,$0.07, and $0.08 for the next 4 quarters, which converts to future expected P/E of 48.15.
Can both companies grow that fast for the next one year? If not, then both stocks seem very expensive. |
China Stocks 
