Key insights
- Trip.com (TCOM) is highlighted as a company to watch due to its significant market share in China's online travel agency (OTA) sector and global expansion. However, ongoing regulatory scrutiny from the Chinese government, including a potential anti-monopoly investigation and fines, poses a substantial risk. While the company shows strong revenue growth and operating margins, the uncertainty surrounding regulatory outcomes makes it a speculative investment, potentially impacting investor sentiment towards Chinese tech stocks.
Most ppl in the comments didn't love me flagging Tencent, so I'll annoy everyone again and flag Trip.com (TCOM) more as one to watch than invest today. Unless you love rolling the regulatory dice or have connections in Beijing.
Trip.com is the Booking or China, when I visited China in 2018 Ctrip was basically the only way I could book travel within China, they have a huge market share in OTAs within China and expanding globally, particularly elsewhere in Asia for either Chinese nationals traveling abroad or other Asian populations. I would not expect it to ever surpass Booking globally, but only serving Chinese nationals it's a huge business for a large population that loves travel domestic and internationally.
In addition to Trip.com / Ctrip, they also own Skyscanner, Qunar, and others and have investments in Tongcheng a major Chinese OTA and MakeMyTrip, an Indian OTA.
TCOM shows you the dangers of investing in China, earlier this year the government announced a SAMR anti-monopoly investigation that is still ongoing. These investigations at their worst can lead to a 10% revenue fine for a company. The largest was a 4% domestic revenue fine on Alibaba in 2021.
Anything less than the maximum 10% fine for TCOM would probably be good news, the worst thing that could probably happen is a fine and they're asked to divest their Chinese OTA subsidiaries/investments which would greatly impact their market share.
Stock trades like a Chinese tech stock facing an uncertain regulatory fine... I wouldn't recommend investing, but it's one to watch.
$30B market cap company with $5B in net cash (some of which will almost definitely be coughed up to the gov). They are growing revenues 15-20% with 25% operating margins and 12x forward earnings. Their trailing P/E is inaccurate bc they sold a piece of their MakeMyTrip investment but they ended up getting lucky on timing with that. Chinese government might have said hmm we want some of that gain given the timing of the announcement.
It's a weird company bc it perfectly illustrates the quality of some Chinese businesses and the huge dangers of the government's success tax, but it's at least interesting for a watch list for now. If the penalties are extremely severe you can probably expect all of Chinese internet platforms to become uninvestable again.