7 Stocks to Buy Before China’s Travel Boom (CEA, ZNH, CTFO, CTRP, HMIN, PCLN, UTA)

by Jeff Reeves | March 25, 2010 2:27 am

7 Stocks to Buy Before China’s Travel Boom (CEA, ZNH, CTFO, CTRP, HMIN, PCLN, UTA)

A top exec at the United Nations World Tourism Organization recently said China will surpass France as the largest tourist destination by 2015, if not sooner. That means big profits for top China travel stocks China Eastern Airlines (CEA[1]), China Southern Airlines (ZNH[2]), China TransInfo Technology (CTFO[3]), Ctrip.com (CTRP[4]), Home Inns & Hotels (HMIN[5]), Priceline.com (PCLN[6]) and Universal Travel Group (UTA[7]).

In the last ten years, the number of foreign tourists has increased from 8 million to 48 million and the number is expected to grow even more as a rising middle class and booming economy attracts Western travelers. This trend means big business for China — and not just on the receiving end of this travel boom. Industry experts predict a whopping 90 million outbound Chinese tourists by 2013. Considering that the largest current tourism destination is France with 80 million incoming tourists total, this is a game changer for the way the world tourism business is going to function in the years ahead.

To help you get your share of the Chinese travel boom, here are the details on the 7 top tourism stocks to buy to benefit from the influx of tourism to this region:

China Travel Stock #1: China Eastern Airlines (CEA[1])

China Eastern Airlines (CEA[1]) is another one of China’s top three airline stocks — with Hong Kong-listed China air rounding out the list. China Eastern Airlines and its subsidiaries provide passenger, cargo, mail delivery and other transportation services in Asia. The company operates a fleet of 240 aircraft, including 214 passenger jets and 11 jet freighters on over 400 passenger routes mainly in mainland China and Taiwan. Though China Eastern may not have quite the leverage on outbound China travel, the airline is based in Shanghai and will be one of the top carriers for tourists looking to check out this bustling China metropolis. Shanghai is one of the largest city propers in the world with 13 million residents, and has a lot to offer international travelers. CEA is so bullish on its growth that it placed orders for 16 new planes in December, even while the rest of the travel industry was bracing for the worst. Considering shares are up 31% YTD, China Eastern execs appear to have made the right move to plan for growth.

China Travel Stock #2: China Southern Airlines (ZNH[2])

China Southern Airlines Company (ZNH[2]) is one of China’s top three airlines. It operates a fleet of more than 300 aircraft (mainly Boeing (BA[8]) and Airbus jets) from its hub in Guangzhou and about 20 regional bases. The airline serves about 150 destinations, including about 120 throughout China and about 30 in other countries, primarily in the Asia/Pacific region. South Korea is one of the most popular destinations for the up-and-coming Chinese middle class, so you will get outbound traffic as well as inbound traffic from the Chinese travel boom. China Southern Airlines extends its international network via code-sharing partnerships with Delta, KLM and Japan Air so it will allow to ZNH tap into key Western travel hubs in the years ahead. Shares are up 25% since February 1 as of this writing.

China Travel Stock #3: China TransInfo Technology (CTFO[3])

As the Beijing Olympics showed us, China still has a black eye with some in the international community for its pollution problems and road congestion. If China is going to be a key travel destination, fixing this problem has to be a top priority. That’s where China TransInfo Technology (CTFO[3]) comes in. China TransInfo is China’s largest transportation information service provider, providing real-time traffic monitoring and primarily caters to the public sector. That’s a lot of revenue hard-wired in to this company — and with the Chinese Ministry of Communication committing to $730 billion in transportation spending over the next three to five years in addition to $195 billion from its 2009 stimulus package, you can bet TransInfo will help China clean up its traffic mess. CTFO will also be able to help buses, trains and other mass transportation expand to meet growing tourist demand as the travel industry evolves. China TransInfo’s fourth-quarter earnings were up 15% when it reported numbers on March 22, and it looks like the growth is set to continue.

Click “next” below for details on the next four China travel stocks: Ctrip.com (CTRP[4]), Home Inns & Hotels (HMIN[5]), Priceline.com (PCLN[6]) and Universal Travel Group (UTA[7]).

China Travel Stock #4: Ctrip.com (CTRP[4])

Established in 1999, Ctrip.com (CTRP[4]) is a leading online consolidator of hotel rooms and airline tickets in China. Ctrip is managed by young Chinese entrepreneurs educated and trained here in America, so it leverages the growth of the East with the proven market practices of the West. The main founder of Ctrip is James Liang, a 35-year-old Georgia Tech grad who learned the software business at Oracle, and then turned a $250,000 investment into a $1.3 billion online travel powerhouse in less than seven years. Now personally worth over $100 million, Liang and his team built Ctrip into one of China’s best-known travel brands, which generates nearly 4% of the entire country’s hotel room reservations. In a country as big as China, that’s alot of rooms! Whether it’s domestic travel or inbound international tourists, Ctrip is likely to get a big share of the Chinese travel pie in the years ahead. Ctrip.com shares have bounced back dramatically from the March 2009 lows and are currently trading higher than at any level even before the financial crisis.

China Travel Stock #5: Home Inns & Hotels (HMIN[5])

Home Inns & Hotels Management (HMIN[5]), as the name implies, manages a chain of economy hotels in China with 547 leased and franchised locations. This means that as tourists descend on China in the coming years, this top China hotel stock will be booked full and rolling in dough. Additionally, as the growing middle class in China travels more and more, HMIN remains a top hotel of choice for domestic destinations. After stumbling in the first quarter of 2009, the stock has bounced back significantly with three straight earnings surprises that average almost 50%. That’s growth you can take to the bank.

China Travel Stock #6: Priceline.com (PCLN[6])

Though pitchman William Shatner makes quips about getting a deal on domestic hotels, don’t think Priceline.com (PCLN[6]) doesn’t have an international footprint. In February, execs at Priceline said international business grew gross travel bookings at an 81% clip. With consumer spending relatively weak in the U.S., PCLN knows its this overseas growth that will drive its success in the future so it’s natural for the company to branch out into China. Additionally, value-conscious consumers really love Priceline’s ability to haggle on prices and this idea of “finding” a good deal will resonate with just about any tourist. At the end of February, Priceline reported its fourth-quarter profit more than doubled over the previous year and shares have been soaring ever since.

China Travel Stock #7: Universal Travel (UTA[7])

China’s Universal Travel Group (UTA[7]) provides domestic and international airline ticketing services in the People’s Republic of China. But the biggest reason this is a top travel stock is because the company also provides hotel reservations, tour planning and railway travel accommodations. Universal Travel Group recently announced that it is selling its subsidiary, Shenzhen Speedy Dragon Enterprise Limited, back to its original owner and will exit the air cargo business — a sign that it is trying to stay focused and do travel well without diluting its business model. That move appears to be paying off, since in its Q4 report UTA posted revenue that was up 16.1% year over year. This growth should continue as the China travel boom takes hold.

Endnotes:
  1. CEA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CEA
  2. ZNH: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZNH
  3. CTFO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CTFO
  4. CTRP: http://studio-5.financialcontent.com/investplace/quote?Symbol=CTRP
  5. HMIN: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMIN
  6. PCLN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PCLN
  7. UTA: http://studio-5.financialcontent.com/investplace/quote?Symbol=UTA
  8. BA: http://studio-5.financialcontent.com/investplace/quote?Symbol=BA

Source URL: http://investorplace.com/2010/03/china-travel-stocks-cea-znh-ctfo-ctrp-hmin-pcln-uta/
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