UTA: Before my first post, I want to thank the board for your incredible wealth of information and the fun-loving, good spirit in which you deliver it. I look forward to joining this motley crew!
Regarding my SA article, I didn't say UTA should trade at CTRP multiple, only that it should trade closer to it. For CTRP to be priced at 10-12 times (46 to 4)) the UTA forward PE multiple makes UTA VERY undervalued in my opinion. My point is that when the stronger (Tier 1) CGS names like CCME and UTA begin to distance themselves from the lower tier CGS names, their multiples will expand and fill the gaps of their China mainstream favorites. When this happens, UTA has more room for upside in 2011 than CCME.
Online/offline:
UTA's overweight emphasis on offline vs. online is not a weakness, but a strength. 80% of all China domestic travel business is offline transactions. Even CTRP, known by most western investors as an "online" China company only got 37% of its's Q3'10 business online. In packaged tours, this is even more tilted offline, and as you know UTA's specialty.
To quote UTA CFO Xie: "the travel industry and consumer behavior are very different in China, where there is huge potential and demand for packaged tour business. This is also what separates us from our competitors and an important part of our growth strategy."
Sure, the online segment will increase for both companies as China consumer spending behavior changes, but we are talking 5-10 years in the future before online is the majority way that the Chinese transact travel purchases and the offline segment will still be huge in this growing sector and economy. UTA is not naive to this and is taking steps to prepare their infrastructure and business relationships for that future. Don't forget that UTA is a partner with Priceline via their Agoda subsidiary.
What I'm focused on going forward in short term is the $.52/share I expect in Q4'10 and the $1.45/EPS for 2010, outearning CTRP by over 40% ($.99 vs $1.45). UTA is known to run into their earnings and it got a nice bounce after CTRP reported last time (CTRP reports on Jan. 31) thanks to CTRP's 100%+ YoY increase in packaged tours. CTRP has guided for another 100% packaged tour increase in Q4, great for UTA!
FYI, my UTA position is only slightly less than my CCME. Love both going into 2011.
