UTVG.OB Makes Impressive Gains Online

The last time I checked, Universal Travel Group's (UTVG.OB) online presence China Booking Association, a hotel reservation website owned by subsidiary Shanghai Lanbao, was ranked ~45,000 in terms of the most popular websites in China. When I checked on Thursday, it ranked ~14,000.

That is an impressive gain and it tells me two things about the company. First, while Universal Travel's strategy last year was gaining a physical footprint across China (with acquisitions in Shanghai, Xian and Foshan), the strategy for 2008 appears to be improving its online presence.

Second, all the press about China being the most wired nation on Earth (with the most internet users) is not just talk but is indeed having a real (and very positive) impact on UTVG. Sure, Universal Travel's website has still a long way to go before catching up with Ctrip.com (CTRP) and eLong.com (LONG), but at the rate it is going, this may not be entirely impossible.

I think the real test here is to see how this website fares after the whole Olympic Games fever dies down. Is the gain a temporary blip? Or will the Games have the permanent effect of exposing the website to a larger audience? We shall see.

In any case, the company came out with 2008 guidance earlier this week, projecting revenues of $69-73 million and net income of $12-14 million, compared to 2007 figures of $44.3 million and $8.7 million respectively. If this bears out, it means UTVG is currently trading at 4.1x 2008 P/E, with a PEG of approx. 0.16, both ridiculously low. I really think we have turned a corner for these Chinese small caps and now is the time to accumulate stock, which is what I have been doing.

My Position: Long.

Comments

[Dutch Trader:]

Chinese stocks are low for a reason. Most of them are hold by insiders so real influence of outside investors on business is limited. Also these stocks are thinly traded, causing difficulty to buy and sell. That is why institutional investors or mutual funds don't pay a lot of attention to this kind of stocks.

Another reason is that accounting rules in China are different than in the U.S. or Europe. Those companies have historically not adopted our management and financial reporting concepts and practises, which includes strong corporate governance, internal controls and, database, financial and other control systems.

2008 Apr 25 07:20 AM

[growthvalue:]

UTVG is a very soild company that will continue to grow. All points in this article are very well laid out. I think that this stock in particular is undervalued and will do well in the future.

2008 Apr 25 12:55 PM

[Tom Santamaria:]

Management is the key & they have continued to deliver amazing growth while keeping dilution to a minimal figure.

True like most Chinese reverse-mergers the need to preserve cash has led to them using stock based compensation to pay for the added expenses of becoming a public company.

When these shares are released from there holding period they have a negative effect on the pps of the stock involved. But once this is overcome the true performance that the company is able to achieve on a fundamental basis will again come shining thru.

I believe the added pressure of those shares coming to market are coming to a end & that UTVG will continue to deliver growth at a very fast pace thus making shares bought now at around 4x eps a absolute steal.

2008 Apr 25 03:11 PM

[rtarle:]

Sounds like BS to me.

2008 May 07 03:58 PM

[rtarle:]

BS meaning that this stock ain't goin' nowhere.

2008 May 07 03:59 PM

[stock boy:]

Do you really see utvg going anywhere??...does this company have enough cash flow to encounter obstacle along the way??...and isnt these type stocks thinly traded which in turn means there value never really has a chance to increase....i want to put 2000 in this company but im hesitate...what do you think these shares will top out at??.....

2008 May 09 07:04 PM