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HRBN, moment of truth around the corner.
I just bought the October $18 - $8 put spread for $1.85. Love the risk reward on this potential fraud.
JKS has a P/E under 1 on plant closure.
Down 25% to $6.80
I'm going to be taking a substantial position this week. I can't resist these prices
http://www.pv-tech.org/news/jinko_solar_forced_to_close_module_manufacturing_plant_after_chemical_leaks
Solars: JKS, TSL, YGE
I haven't been long any Chinese stocks for a while now but these best of breed solar companies seem to be at prices that are too good to pass up.
TSL @ $10.50, P/E: 2.74, Price/Book: 0.72
JKS @ $11.28, P/E: 1.60, Price/Book: 0.56
YGE @ $4.63, P/E: 1.90, Price/Book: 0.53
Anyone else buying at these depressed levels? Anyone advocate staying away?
Northland Securities humor (ZAGG, CCME)
Yesterday Citron Research came out with a hit piece on ZAGG, the maker of iPhone accessories.
Today Northland Securities reiterated their buy recommendation on ZAGG calling the Citron pullback a buying opportunity.
CCME holders might feel a bit of deja vu since after Citron's hit piece on CCME Northland called the selloff a "must buy opportunity" and reiterated CCME as its "Top Pick of 2011."
Their reiteration of ZAGG brings up one obvious question. Are you effin kidding me!?!?!?!? Can't make this stuff up.
IB raising margin requirements on Solars and YOKU with the odd justification that they can't trust reverse mergers (not sure why that should effect the IPOs but I guess its more pc to say a class of stocks are frauds rather than a race of people are crooks)
Dear Trader,
IB regularly monitors individual securities and imposes ‘house’ margin requirements which exceed regulatory minimums when we believe the risks of holding such securities on margin to have increased. Given the recent market volatility and risk factors associated with a class of securities formed via a method known as ‘reverse merger’, IB will be increasing the margin requirement on a new batch of these securities starting today, June 21, 2011, after the US market close. You are receiving this notice as one or more of the securities currently held in your account will be impacted by this change. Please manage your risk accordingly.
The scheduled increases are as follows and will take place after the US market close on each date:
June 21, 2011 – 50%
June 22, 2011 – 75%
June 23, 2011 – 100%
Affected symbols:
AII
ASIA
CIS
CISG
CLNT
CWZN
JASO
JKS
LDK
MR
SOL
STP
TAOM
TSL
YGE
YOKU
QXM is majority owned by XING.
XING offered to buy all outstanding QXM shares 6 months ago for 1.9 XING shares plus 90 cents (if i remember correctly) but the deal fell through under suspicious circumstances. Eventually failing when QXM didn't get a quorum in the meeting to vote to approve the merger.
I would think that it is a likely fraud.
YOKU: Added to Conviction Buy list at Goldman Sachs
This could be the catalyst for the bounce on some of these oversold internet names. I think they all are a buy premarket for a trade.
RENN/DANG/YOKU/SINA Internet stocks down 30% in two weeks. 50% in the past month.
At some point these are going to have to become buys. I covered my shorts. Anyone think that we are close to a bottom? Are any of these names preferable to the others for a bounce play?
LLEN busting a move, up 15%
$5.30 is where it failed last week. It had opened at $6.13 prior to the seeking alpha article two weeks ago.
I sold my June calls and am looking to reestablish in July on a pull back.
Anyone else playing this one?
CHU: Any news on accounting irregularities?
China Unicom was only down 2.09% in Hong Kong overnight but is down 4.3% and hitting new intraday lows right now. 4.3% in CHU is a big move, it would be its third biggest one day drop this year.
I haven't found anything in English, did anyone see any CHU news that came out in Asia tonight? As I'm long puts, I am hoping for some further developments with their accounting irregularities.
LLEN: Monday's trading action was really ugly and T Squared seems to believe that another hit piece is coming (which is why they posted response to share sleuth) publicly.
The negative article that came out two weeks ago with the stock over $6 seemed to a be a manipulation of the facts under a scary title and that author has since stated "I had originally intended to post several follow up articles focusing on other aspects of the company, but... I no longer plan to continue this story." link
Like everything else in this space LLEN is supremely undervalued if it is a legitimate company. China needs coal to fuel its economic growth and LLEN is well positioned to fill that demand. While the short interest is high there aren't an inordinate number of outstanding puts, watch the put volume for an indication of a pending bear raid. I don't believe that its a fraud however I am only buying using calls to limit my downside in case I am wrong.
I bought last week so I am not buying now but will average down if it falls to $4. I believe it will be halted/delisted or above $10 within a year.
DANG/YOKU. Thanks for the correction.
I was going by this article which stated that their lockups end on Wednesday. However, after your post I checked the Nasdaq site (DANG YOKU) and you are correct that they expired yesterday.
YOKU down 8% today and DANG down 7.25% today after both selling off yesterday. DANG is at its alltime low and selling is accelerating.
The Chinese internet space has been getting hit hard lately with SINA, SOHU, BIDU all down 20%+ off last month's highs.
YOKU/DANG Getting hammered again today
Lockup ends tomorrow, they probably have further to fall. I am holding my shorts but moved my stop down today
Short idea: DANG/YOKU, lockups expire Wednesday
I'm a little late on this short idea with both stocks down 4.5% today and DANG at its all time low but with the lockups from their IPOs expiring Wednesday I expect selling pressure to continue through the week.
LLEN: Up 10% now.
Last time it bounced off these levels in April it was a 50%+ multi day bounce. I'm not suggesting that again but it wouldn't surprise me either.
Probably not a buy right now but it still has a PE or 3.6 and is a nice buy on a mid day pullback.
WSJ: SEC Probes China Auditors
By MICHAEL RAPOPORT
The Securities and Exchange Commission is investigating some accounting firms over their audits of Chinese companies whose shares trade in the U.S., and the inquiry is expected to lead to enforcement cases, people familiar with the situation said.
The SEC has publicly indicated it was examining accounting and disclosure issues regarding Chinese companies that engaged in "reverse mergers," which allow companies to list on U.S. exchanges without as much regulatory scrutiny as an initial public offering. People familiar with the matter say the investigation also includes auditors, which hadn't previously been known. As part of its inquiry, the SEC has suspended trading on some Chinese companies, questioning their truthfulness about their finances and operations.
The Public Company Accounting Oversight Board, or PCAOB, the government's accounting regulator, said it is investigating some audit firms over whether their audits of Chinese clients are stringent enough.
The regulators' investigations involve both large and small accounting firms. It isn't known which accounting firms are part of regulators' probes.
If regulators find violations, they could file administrative proceedings against audit firms over allegations such as improper professional conduct, and the SEC could file civil lawsuits as well. It is unclear when regulators might act.
The accounting oversight board says the audits are sometimes weak in part because of obstacles that make it hard to sniff out problems: Some U.S. auditing firms outsource accounting work to inadequately trained Chinese accounting firms, and China has blocked the board from inspecting audits on-site, though PCAOB Chairman James Doty said he was optimistic the inspection issue could be resolved by year's end.
"Right now, the auditing and regulation of U.S.-listed Chinese companies isn't working very well," said Paul Gillis, a visiting professor of accounting at Peking University's Guangha School of Management.
In reverse mergers, a foreign company is "bought" by a publicly traded U.S. shell company. But the foreign company assumes control and gets the shell's U.S. listing without the level of scrutiny that an initial public offering entails. Though companies from other countries also engage in reverse mergers, such deals are especially common among the Chinese. The PCAOB says nearly three-quarters of the 215 Chinese companies listing in the U.S. from 2007 to early 2010 did so via reverse merger.
Since February, about 40 Chinese companies have either acknowledged accounting problems or seen the SEC or U.S. exchanges halt trading in their stocks because of accounting questions.
The U.S. firms that audit Chinese companies are mostly small shops. From 2008 to early 2010, at least 40 U.S. accounting firms with fewer than five partners and 10 professional staff issued audit reports on China-based companies, according to the PCAOB.
Regulators' scrutiny puts these accounting firms in a difficult position: Some firms whose Chinese clients have seen their accounting questioned say they are doing everything they can to perform strong audits, including maintaining their own offices in China and employing bilingual staffers, and they are intensifying their efforts to detect improper accounting.
But that may raise questions about whether their past efforts were strong enough, especially among some investors who have sharply criticized some Chinese companies.
The PCAOB says some U.S. auditors who farm out work to local Chinese auditors aren't verifying that the work complies with U.S. auditing standards. In 2009, the board barred an Arizona firm, Clancy & Co. PLLC, from auditing public companies, in part over that issue. In April, the PCAOB barred Utah's Chisholm Bierwolf Nilson & Morrill LLC, in part because of a similar issue; the board said Chisholm Bierwolf relied on inexperienced Chinese-speaking assistants to help audit Chinese clients without adequately supervising them. The firms couldn't be reached for comment.
The Chisholm Bierwolf ban is permanent; the Clancy ban allowed the firm to reapply to the PCAOB after one year, but there is no indication it has done so.
LLEN: I'm accumulating.
With the put/call skews out of whack I am thinking of getting synthetically longer via short puts and long calls.
Its down on a low content hit piece and the author apparently isn't going to have a follow up. Its PE of 3.36 is less than 1/4 of the PE of YZC. They are expanding in the biggest coal market in the world and spot prices are still high.
It ran 50% in one week off its post CCME bottom in April.
It just seems like the risk reward favors the longs greatly at this level.
HRBN: Citron hit piece out
http://www.citronresearch.com/
Citron published HRBN's SAIC filings in their report. Has this been done before?
LLEN: I'm in. The only scary part about that hit piece was the title and the threat of a follow up. I'm sure someone will bring up that a Chinese coal at a 3.6 PE is too good to be true...
I'm only making small investments in these tainted stock but this seems like a potential gift buying opportunity in a stock that I have been watching for a while.
LLEN: Anyone buying the dip?
I am considering taking a (very small) position using calls to limit my downside.
The release of the Real product goes a long way in disproving the fraud hypothesis.
There are red flags that come up due to Tom's previous involvement in the NicStic scam and the involvement of other backers in past securities scams. In the previous scam a product was never released so SFIO has taken a major step in putting that behind them with the launch of their Real product.
I was wrong about the PPS so my credibility should be severely diminished. I am not going to rehash those concerns any more in the absence of new concrete evidence of wrongdoing.
If you want to learn more about the fraud hypothesis you can search my old posts which contain links to the research about some of these concerns. Keep an eye out for a filing announcing further dilution but in the absence of such a filing this company is looking a lot more legitimate.
The company and its investors are winning and the skeptics such as myself were on the wrong side of this. Congrats to all of the longs.
Congrats to all of the longs.
I am sincerely happy for all of you. I did a ton of DD on this one and sincerely believed my conclusions. While I am still skeptical of management the only thing that matters is making money and I was 100% wrong with my position on this stock.
I am glad that you did not listen to me. I hope that you averaged down and realized a lot of profits during this amazing run.
NTES: Chinese prisoners forced to play WoW
China used prisoners in lucrative internet gaming work
Labour camp detainees endure hard labour by day, online 'gold farming' by night
As a prisoner at the Jixi labour camp, Liu Dali would slog through tough days breaking rocks and digging trenches in the open cast coalmines of north-east China. By night, he would slay demons, battle goblins and cast spells.
Liu says he was one of scores of prisoners forced to play online games to build up credits that prison guards would then trade for real money. The 54-year-old, a former prison guard who was jailed for three years in 2004 for "illegally petitioning" the central government about corruption in his hometown, reckons the operation was even more lucrative than the physical labour that prisoners were also forced to do.
"Prison bosses made more money forcing inmates to play games than they do forcing people to do manual labour," Liu told the Guardian. "There were 300 prisoners forced to play games. We worked 12-hour shifts in the camp. I heard them say they could earn 5,000-6,000rmb [£470-570] a day. We didn't see any of the money. The computers were never turned off."
Memories from his detention at Jixi re-education-through-labour camp in Heilongjiang province from 2004 still haunt Liu. As well as backbreaking mining toil, he carved chopsticks and toothpicks out of planks of wood until his hands were raw and assembled car seat covers that the prison exported to South Korea and Japan. He was also made to memorise communist literature to pay off his debt to society.
But it was the forced online gaming that was the most surreal part of his imprisonment. The hard slog may have been virtual, but the punishment for falling behind was real.
"If I couldn't complete my work quota, they would punish me physically. They would make me stand with my hands raised in the air and after I returned to my dormitory they would beat me with plastic pipes. We kept playing until we could barely see things," he said.
It is known as "gold farming", the practice of building up credits and online value through the monotonous repetition of basic tasks in online games such as World of Warcraft. The trade in virtual assets is very real, and outside the control of the games' makers. Millions of gamers around the world are prepared to pay real money for such online credits, which they can use to progress in the online games.
The trading of virtual currencies in multiplayer games has become so rampant in China that it is increasingly difficult to regulate. In April, the Sichuan provincial government in central China launched a court case against a gamer who stole credits online worth about 3000rmb.
The lack of regulations has meant that even prisoners can be exploited in this virtual world for profit.
According to figures from the China Internet Centre, nearly £1.2bn of make- believe currencies were traded in China in 2008 and the number of gamers who play to earn and trade credits are on the rise.
It is estimated that 80% of all gold farmers are in China and with the largest internet population in the world there are thought to be 100,000 full-time gold farmers in the country.
In 2009 the central government issued a directive defining how fictional currencies could be traded, making it illegal for businesses without licences to trade. But Liu, who was released from prison before 2009 believes that the practice of prisoners being forced to earn online currency in multiplayer games is still widespread.
"Many prisons across the north-east of China also forced inmates to play games. It must still be happening," he said.
"China is the factory of virtual goods," said Jin Ge, a researcher from the University of California San Diego who has been documenting the gold farming phenomenon in China. "You would see some exploitation where employers would make workers play 12 hours a day. They would have no rest through the year. These are not just problems for this industry but they are general social problems. The pay is better than what they would get for working in a factory. It's very different," said Jin.
"The buyers of virtual goods have mixed feelings … it saves them time buying online credits from China," said Jin.
The emergence of gold farming as a business in China – whether in prisons or sweatshops could raise new questions over the exporting of goods real or virtual from the country.
"Prison labour is still very widespread – it's just that goods travel a much more complex route to come to the US these days. And it is not illegal to export prison goods to Europe, said Nicole Kempton from the Laogai foundation, a Washington-based group which opposes the forced labour camp system in China.
Liu Dali's name has been changed
CHU: Fraud while its at 125 week highs.
I loaded up on puts this morning. They are still very reasonably priced. I wouldn't be surprised to see a swift retracement to the 50 day moving average at $18.60 and then to fill the gap to $17.50 from early April.
Here is an article (by an English as a second language author) about some of the issues:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63451443
DATE: Jiayuan.com China's hottest new internet IPO
I don't know anything about the fundamentals of DATE. However, there are more single dating age people in China than there are total people in the US.
DATE is up 50% since its IPO two weeks ago and looks to be a reasonable momentum play.
Anyone here trading or have any thoughts on DATE? I think that the China Stocks message board could make a great place for discussion on these names that don't fit the RTO 'growth stock' criteria... now all we need is some discussion.
Disclosure: No position, considering going long.
CHU: China Unicom accounting problems (article)
China Unicom to receive 4 years of false invoices 14 million was ordered rectification
http://www.cnkeyword.info/china-unicom-to-receive-4-years-of-false-invoices-14-million-was-ordered-rectification/
2011-05-23 01:00:09 Source: First Financial Daily (Shanghai)
National Audit Office recently issued on the financial revenue and expenditure of China Unicom in 2009 results of the audit pointed out that China Unicom in accounting, related party transactions, some materials procurement and management and other aspects and other issues not standardized and strict, requiring China Unicom to rectification.
Learned that the focus of the audit of the Audit Commission headquarters of China Unicom and 8-owned companies, with assets 280.525 billion yuan, accounting for 54.71% of total assets of China Unicom.
Audit report, China Unicom in the accounting and financial management problems. Mainly related to early recognition of income, consolidated accounting statements do not complete this Part and inaccurate cost-sharing listed companies as well as advertisers and agencies issuing false invoices and other issues.
Audit owned by China Unicom 4 enterprises from 2006 to 2009 part of the invoice for spot checks and found that advertisers and agencies related to the amount of false invoices issued a total of 14.0081 million yuan.
China Unicom also bidding in the project problems. The main problems are: 5 companies owned a significant part of the procurement and tendering for public works projects is not the end of 2009 involving a total amount of 1.881 billion yuan.
Audit opinion on the audit for the evaluation of subordinate enterprises involved in China Unicom’s major problems, China Unicom issued a statement to respond, the problem of the company’s past results of operations, financial reporting, internal control audit opinion and evaluation of no significant impact, the company has with the state Audit Commission’s audit process active rectification.
For individual advertisers and agencies to provide false invoices to the company issues and China Unicom to investigation of its real economic activity, the company has to call for specifications and make the replacement invoices and invoices in the Group-wide compliance checks carried out, developed “on the invoice and other external instruments to further strengthen the management,” which were targeted training to enhance capacity for the identification of false invoices, the invoice management process to further refine the system and the establishment of the blacklist.
Editor: NF018 ( First Financial Daily Author: Liu Jia)
CHU: "inadequacies" in procurement and accounting
CHU hit 30 month highs on Friday and its puts are still very reasonably priced (implied vol less than 40). I am getting short via the puts
"China Unicom (CHU) said on Friday that an audit of China Unicom's state-owned parent company had identified improper practices by the parent company in 2009. These include "inadequacies" in procurement procedures and accounting procedures, China Unicom stated. However, the telecom company said that it had implemented a number of measures designed to rectify the improper practices. China Unicom said that the past improper practices would have no material impact on its operating results, financial statements, audit opinion and internal control assessments. In a note to investors today, Wedge Partners wrote that China Unicom is facing significant financial reporting issues, and that the shares would be significantly hurt by Friday's news. In mid-morning trading, China Unicom dropped 86c, or 4.05%, to $20.38. :theflyonthewall.com"
http://www.theflyonthewall.com/permalinks/entry.php/CHUid1433771/CHU-China-Unicom-sinks-after-audit-finds-improprieties-at-parent-company
FXI has the most liquid options market.
Hong Kong listed FTSE China 25 index with weighting and sector:
CHINA CONSTRUCTION BANK-H 9.89 Financials
CHINA MOBILE LTD 8.53 Telecoms
IND & COMM BK OF CHINA - H 8.1 Financials
CNOOC LTD 7 Oil & Gas
BANK OF CHINA LTD - H 6.02 Financials
CHINA UNICOM HONG KONG LTD 4.82 Telecoms
PING AN INSURANCE GROUP CO-H 4.2 Financials
AGRICULTURAL BANK OF CHINA 4.1 Financials
CHINA SHENHUA ENERGY CO - H 4.04 Basic Materials
CHINA TELECOM CORP LTD-H 3.87 Telecoms
PETROCHINA CO LTD-H 3.85 Oil & Gas
CHINA PETROLEUM & CHEMICAL-H 3.76 Oil & Gas
CHINA MERCHANTS BANK - H 3.66 Financials
BANK OF COMMUNICATIONS CO-H 3.64 Financials
CHINA LIFE INSURANCE CO-H 3.55 Financials
YANZHOU COAL MINING CO-H 3.46 Basic Materials
CHINA PACIFIC INSURANCE GR-H 3.24 Financials
CHINA CITIC BANK - H 2.88 Financials
CHINA COAL ENERGY CO - H 2.38 Basic Materials
CHINA MINSHENG BANKING-H 1.73 Financials
AIR CHINA LIMITED-H 1.6 Consumer Services
ALUMINUM CORP OF CHINA LTD-H 1.57 Basic Materials
ZIJIN MINING GROUP CO LTD-H 1.29 Basic Materials
CHINA COSCO HOLDINGS-H 1.06 Industrials
CHINA RAILWAY GROUP LTD - H 0.96 Industrials
SCEI announces repurchase of 100,000 shares
Stock : Sino Clean Energy Inc. (MM) (SCEI)
Quote : 2.54 -0.14 (-5.22%) @ 1:48PM
Sino Clean Energy, Inc. Repurchases 100,000 Shares of Common Stock
Sino Clean Energy Inc. (MM) (NASDAQ:SCEI)
Intraday Stock Chart
Today : Friday 20 May 2011
Sino Clean Energy Inc. (Nasdaq: SCEI) ("Sino Clean Energy," or the "Company"), a leading producer and distributor of coal-water slurry fuel ("CWSF") in the People's Republic of China ("China"), today announced that it has repurchased 100,000 shares of common stock under the terms of its previously announced share repurchase program. Repurchases will be made in accordance with applicable securities laws in the open market or in privately negotiated transactions. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.
NTES: they have had trouble with regulators in the past.
About 18 months ago NTES first attempted to launch their World of Warcraft in china but they didn't have the right guanxi or they didn't grease the right palms and their launch got held up substantially as two regulatory bodies attempted to exert control over online video games.
When NTES got appoval from only one of the regulatory bodies they launched the game causing the other agency to loose face. NTES had to pay a fine, publically apologize, and reel in their launch. Eventually the game got approved, recently sending the stock to alltime highs
I am not familiar with the NTCY story but due to the fact that NTES had a history of poor government relations and because they have embarrassed some of their regulators with their premature launch of WoW I would consider them a high risk in the event of a government crackdown. That said, as an investor I wasn't overly concerned th at another crackdown is immanent.
FWIW the last time I was in Shanghai I did see billboards for their 163.com website everywhere.
CHBT: LOD seeing some moderate selling pressure today
There are a lot of outstanding put options that expire tomorrow (2714 at $12.50, 2237 at $11, 3316 at $10) so it is in someone's best interest to walk this fraud down today and tomorrow.
Additionally, the shorts have freed up some money with CCME being unhalted and this is one of the stocks that they have in their sights.
Edit: it fell off a cliff after my post, is there a new hit piece out?
Plan to trade out of my new shares up 20% (right under $3). I'll also bail at the low of the day ($1.85) if we get there first.
Given my history of buying CCME and then selling at a much lower price I woudn't encourage anyone to follow my trade. I got a relatively good exit price this morning and will probably squander it because I can't look away from this train wreck.
whats your exit?
NTES: Beat estimates but COO Zhan resigns (for personal reasons)
I love the Netease story because I know many Chinese-Americans who have become immersed in the World of Warcraft. There is still another 600 million Chinese yet to connect to the internet and WoW is cheap entertainment for the masses.
I have been adding gradually to a core position in my retirement account but I just sold out at $47.10 upon reading of Zhan's resignation. Their COO Zhonghui Zhan had been with the company for 12 years and had been a vital part of their development.
I like the NTES story, I like the general trend of the Chinese internet stocks, and I like the NTES chart. I might reestablish a position in an options approved account using puts as insurance.
Back in for a bounce at $2.35
RENN: strong for the second day in a row.
I'm hoping for and expecting a pretty nice multiday bounce after selling off consecutively for two weeks from its IPO morning highs of $24.
RENN owns 10% of eLong?
One of RENN's IPO document says that they own marketable securities in eLong. link
A few low quality sources online are citing that RENN bought a 10% stake in eLong in February 2009. link
The head of Renren's audit committee is the CFO of now halted LFT and he resigned from RENN after the Citron hit piece immediately prior to the IPO. He was previously the CFO of eLong and SOHU.
Verification of the 10% stake and other discussion on RENN is encouraged though I fear the more research I do the less I will like this investment. Maybe I should just stick to the buzz words.
The trading action did look strong today and I'm feeling good about my new Friday expiry calls.
RENN: It is liberating to 'invest' in losing money ventures
We spend significant time in CGS dissecting earnings statements and balance sheets in attempt to value stocks based on their company's true value. What we are left with is a basket of stocks, many of which are trading at less than the value at their assets, some of which are trading at a market cap less than their cash+receivables, and almost all of which that are trading at forward PEs under 5 yet are still somehow despite seeming like a too good to be true deal these stocks are still uninvestable.
Maybe the key is to buy stock in companies that are losing money and thus don't have earnings upon which to be (under) valued. Stocks that are losing money are priced according to the buzz that they can generate about a potential future.
A list of the hottest buzz adjectives leading to premium valuations (in no particular order):
*China
*Internet
*Mobile
*Social networking
*Apps
*Facebook
*Groupon
*(Cloud)
*(Lithium)
*(Rare Earths)
Renren hits all but those last three buzz words and probably a lot more that have investors salivating.
RENN is no more the 'Facebook of China' than DANG, an online bookstore, is the 'Amazon of China' but lets not let reality get in the way of our dreams.
I have been waiting for a green day to dip my toe into the water with RENN. The calls are running at a discount so I bought a handful of $13 strike May calls for $0.60 using the options for the primary purpose of limiting my downside rather than obtain leverage.
RENN calls are currently relatively cheap and if they are still running at an implied volatility around 80 at the end of the week I will probably roll these calls forward if they wind up in the money. If the slide continues I will wait for another up day to reestablish my position.
LFT halt. Another win for Citron. Another loss for Deloitte.
LFT was profiled as a fraud on citronresearch.com on April 26th
EXPE: Great call Rames.
Chart looks primed for a breakout and the mispricing of its LONG stake seems to be a good a catalyst as any. I love this whole sector so I followed your call yesterday and am glad I did.
I also am planning to buy back a little bit of the LONG I sold yesterday as it usually runs for days to weeks when it gets going
CTRP / LONG: online travel industry in China
China's online distribution lags other markets: HotelNewsNow.com
April 29th, 2011
REPORT FROM CHINA—While the Chinese government lures international 5-star hotel brands, the lower-tier hotel market is expanding into secondary and tertiary cities throughout China to meet the demand needs of a new, domestic traveler. Simultaneously, the online distribution space is adapting to connect that emerging consumer with increasing hotel supply.
For the most part, the Chinese traveler uses the Web to search for travel but calls a reservation center to book. China has a service-oriented culture, which lends itself to communicating over the phone to make purchases. But the penetration rate of online transactions is growing very quickly, at about 50% per year, according to Fritz Demopoulos, CEO of Qunar.com, a travel metasearch company similar to Kayak.
“It is estimated that about 12% to 15% of tickets and rooms are booked online in China,” he said. Of that online market, approximately 70% to 80% of transactions are done through third-party intermediaries versus supplier direct, he said.
To capitalize on that growth, hotels are ensuring they have the right online infrastructure in place. Best Western International, which licenses 31 hotels in China and has another 41 in the pipeline, emphasizes distribution service and support to its licensees. The company has regional service managers who work with the hotels daily to manage the available channels, said William Dong, Best Western China president and CEO.
China’s online travel market during the first quarter this year exceeded US$2 billion in revenue from third-party online travel agents, up 4.7% compared to the fourth quarter of 2010, according to China Internet Watch. CTrip remains the No. 1 OTA in China, capturing 47% of online bookings in the first quarter. The next closest is Elong.com, owned by Expedia, which captured 8% of the online booking market.
“CTrip stands out above all other OTAs,” Demopoulos said. “Emerging players include Alibaba’s Taobao and Expedia's Elong. Booking.com and Agoda are making headwinds, albeit slowly. Other good but small domestic players include Etpass and Mangocity.”
There are other travel-related websites for overall travel search (Qunar) and packaged deals (Tuniu, Uzai). There is no market yet for vacation rentals, Demopoulos said.
OTA model in China
The economics of OTAs are slightly different than in the U.S. in that most OTAs operate on a simpler commission-based model that is more cost-effective for hotels, said Ken Greene, president and managing director, APAC region, Wyndham Hotel Group, which had 301 hotels in China at the end of 2010. Wyndham has outsourced its in-country call center to Elong and representatives at the OTA are trained to answer as representatives of the Wyndham brands.
“There are ways to work with the third parties that hasn’t been done in the U.S.,” Greene said of China.
Both Wyndham and Best Western reported having strong relationships with domestic OTAs, although Greene is slightly concerned Ctrip seems to be taking steps toward creating its own brand. Although BestWestern.com is slowly losing its share of traffic to the third-party channels in China, Dong said technological roadblocks remain in the way rates and availability are communicated.
“They don’t have a proper channel to communicate with the hotel,” he said. “The feeder system isn’t quite up and running, so we have experienced some difficulty.”
Demopoulos said the success of the hotel-OTA relationship in China depends on whom you ask. On one hand, the larger chains are frustrated at the lack of flexibility and limited negotiation power, he said. On the other hand, independent hotels, which make up approximately 65% of the Chinese landscape, like the volume provided by the high quality OTAs.
“Exceptions to that include the emergence of budget chains, such as (Home Inns & Hotel Management), (7 Days Group Holdings Limited) and (China Lodging Group), which sell a significant portion of their inventory directly,” he said. “The big international guys are also gaining leverage. Over time, we'll see more leverage as direct channels gain traction.”
“The agency distribution space is dominated by Ctrip even more so than Expedia in the U.S., and hotels are incredibly thankful,” added Brett Henry, online distribution analyst and VP of marketing for Abacus, a form of GDS in China owned in a joint venture by Sabre. “I would say the tension is not quite like it is in the U.S. While people are concerned, no one’s trying to take action. Any time someone has control over so much of your market you’re going to be concerned.”
Third-party intermediaries
Outside of selling rooms, Chinese hoteliers are not as active on the Internet as in other markets. Nearly every OTA and metasearch player has a substantial peer review service, but there is no dominant player like TripAdvisor in the U.S.
Most social networking is regulated by the Chinese government; Facebook is not accessible. Very few of the Western brands with a presence in China have invested enough in social media to begin leveraging it, but some of the smaller domestic China properties are using it very effectively, Henry said.
“In terms of how many hotel brands are leveraging social media to drive bookings in China, it is very, very low,” he said. “Jin Jiang and Home Inns—yeah they’re all over it.”
Wyndham is beginning to strategize around specific social media sites in China, Greene said, but it remains difficult because the traditional global networks are unavailable.
“There are some domestic social websites and those we’re trying to exploit,” he said. “Quite frankly, those are big markets. There’s a big site where people aggregate purchasing power and are doing volume buys on merchandise. It’s a pretty big avenue for us to market; we just haven’t done it yet.”
Dong said Best Westerns in China uses a property-management system that collects comments, but, because of several disconnects, most hotel managers don’t know how to handle them properly.
The use of mobile technology to search and book travel still has a low penetration rate in China, Demopoulos said. Ctrip and Qunar have had success with their mobile sites, he said, but during a recent earnings call, Ctrip said the channel is “immaterial at this point.”
“This actually has not started looking positive in China yet because the system owner is the government,” Dong said.
Mobile spam is more prevalent in China than in the U.S., Dong said, and on any given day he’ll receive more than 100 spam text messages. Therefore, Best Western avoids contacting consumers via the mobile device, because it could give the wrong perception and damage the brand’s credibility, he said.