In an article that I wrote on May 3, I urged my readers to sell all of their stock holdings because my research indicated at that time that stocks were in the process of peaking. Thus far, that recommendation appears to have been a good one, as stock prices in general, as measured by the S&P 500 Index, pulled back considerably during the past couple of weeks.
In that same article, I advised my readers to use the time between a possible economic slowdown and a resurgence of the current economic expansion to create a list of stocks that are likely to generate substantial returns once the economy shows signs of improving.
Two stocks that you might want to include on your list of potential investment candidates are Ctrip.com (CTRP)
and Makemytrip (MMYT)
Make 12.3% Without Touching Stocks, Bonds, or CDs . . .
Ctrip.com is a leading provider of hotel accommodations, airline tickets, and packaged tours in China. The company is the largest consolidator of hotel accommodations and airline tickets in China in terms of the number of room nights booked and the number of airline tickets booked.
As of Dec. 31, 2010, the company had booking relationships with approximately 17,000 hotels in China and approximately 20,000 hotels abroad. In regard to those relationships, the company has guaranteed room allotments with approximately 70 percent of the hotels in China with whom it has a supply relationship, meaning that Ctrip is able to reserve hotel rooms for its customers even during peak travel seasons. During the year ended Dec. 31, 2010, those guaranteed room allotments accounted for approximately 90 percent of the company’s hotel transactions.
In addition to its hotel relationships, Ctrip has booking relationships with all of the major Chinese airlines and numerous international airline carriers that operate flights that originate in China. The company is among the few airline ticket consolidators in China that maintain a centralized reservation system and ticket fulfillment infrastructure covering substantially all of the economically prosperous regions of China.
Ctrip’s airline ticketing customers can make flight reservations on their chosen routes and arrange for the payment and delivery of those tickets through the company’s ticketing offices and third-party agencies located in more than 60 major cities in China.
The company provides its services through an advanced transaction and service platform consisting of centralized toll-free, 24-hour customer service centers and bilingual websites.
Ctrip derives its revenues through commissions from its travel suppliers, based on the transaction value of the rooms, airline tickets, and packaged-tour products that are booked through the company’s services. The company acts as an agent in substantially all of its transactions and it generally doesn’t take any inventory risks with respect to the hotel rooms and airline tickets that it books.
During the year ended Dec. 31, 2010, Ctrip derived approximately 42 percent of its revenues from the company’s hotel reservation business and approximately 39 percent of its revenues from the company’s air-ticketing business. Approximately 12 percent of the company’s revenues during 2010 were derived from Ctrip’s packaged-tour business.
Makemytrip Ltd. is the No. 1 online travel agency in India. Through the company's web site, www.makemytrip.com, travelers can research, plan, and book a range of travel products and services, including airfare through all major airlines operating to and from India, more than 4,000 hotels both within and outside of the country, and rail and bus tickets through major domestic operators in India.
In addition to providing the company’s travel services via the Internet, Makemytrip utilizes call centers and an extensive network of travel agents to generate revenues.
Not only does the company serve a large and expanding customer base in India, it also targets Indians living abroad, primarily in the United States. The company offers pre-packaged vacations designed by its in-house product specialists under arrangements with various travel suppliers to cater to both individual and group travelers.
The company also offers a variety of travel packages, including customized group tours, honeymoon specials and weekend getaways, as well as numerous vacation themes.
The company's meetings, incentives, conferences, exhibitions and events (MICE) group offers services to organizations and other groups, including students or families who wish to plan meetings, conferences and other events or to organize group trips.
The investment opportunity
Ctrip and Makemytrip grew their revenues and earnings at very fast rates during the past few quarters and both companies expect to continue to increase revenues and earnings at fast rates throughout the remainder of this year. Both of those companies have also been able to generate substantial profits from each dollar of sales.
Ctrip and Makemytrip are also strong financially, with both of those companies being able to easily pay their recurring monthly bills from ongoing operating activities and neither of those companies having any significant long-term debt.
Although the stock prices of those companies have pulled back sharply since the middle of April, the longer term fundamental outlook for Ctrip and Makemytrip appears to remain fully intact.
About the Author: David Frazier
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