Pullback following the earning call resulted in the CTRP shares trading at $58 level today. I am liking the shares at these levels. Although the shares will remain volatile and we could see additional dip as nervous traders continues to like to take the momentum out of the stock, I would start buying back your shares at these levels. Start commiting 50% of what you have sold earlier. Buy back again as you confirm the uptrend.
CTRP is currently trading at roughly 31X based on forward (08) multiple. This multiple (in the range between 30 ~ 35) is what I feel comfortable with the stock. The management indicated the revenue guidance exceeding 30% YOY and 35% op ex number. This will put PEG below 1. Also I continue to believe that this guidance is conservative, given traditionally slow Q1 involving Chinese New Year. This implies PEG ratio well below 1. In my opinion, CTRP will continue to execute its business and achieve topline growth rate in excess of 35% over next 5 years. In 08, upcoming Chinese 08 Olympic will drive tremendous travel volumes for the company; consequently, guidance is conservative and the company is poised to beat the YOY growth estimate. As we enter late 07, the investors will be looking towards 09 estimate, which may be in excess of $2.5. Again applying PE of 35 (upper range of my comfort zone), I would see shares trading around $88 by late 07 to early 08. I like the upside from the current level.
Original investment thesis for CTRP:
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Previous articles on CTRP:
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$31.0 (02/14/07)
