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Jason Lee is a professional investor, running investment business in Asia Picific & US market.
  • QUNR, Where To Go? 0 comments
    May 19, 2014 5:25 AM | about stocks: QUNR

    Qunar Cayman Islands Limited (NASDAQ:QUNR) was recently released first quarter of 2014 transcript. EPS -$0.27 misses by $0.15, stock sharply drop 28% since last month.

    Yahoo Finance Chart

    QUNR total revenues for the Q1 were CNY335.5 million (US$54.0 million), an increase of 83.6% year-on-year. Total number of web and mobile users for the Q1 were 241.0 million and 60.3 million, an increase of 24.1% and 86.1% year-on-year´╝îwas surpassing the QUNR's revenue guidance of a 65-70% year-on-year increase.

    Revenue grew 90% which from flight booking contribution by the strong volume growth. Volume growth rate is 75%, more than twice of the other large online travel agencies.

    The mobile device's contribution are huge, mobile revenues for the Q1 were CNY106.3 million (US$17.1 million), an increase of 415.1% year-on-year, representing 31.7% of total revenues. Consumer, who use mobile device book hotel are 47.7%, and booking flight are 32.4%.

    Compare with revenues, why EPS misses expected? Mainly because operating loss and administrative cost increase fast. Operating loss for the first quarter of 2014 was CNY174.1 million (US$28.0 million), exclude online marketing expenses from the BAIDU Zhixin Cooperation Agreement of CNY66.9 million. This is 71.73% of total revenue. General administrative fee were CNY78.3 million (US$12.6 million), an increase of 293.0% year-on-year. Primarily due to a substantial increase in share-based compensation expenses and an increase in salary and welfare expenses as a result of an increase in headcount and average salary. That is 23% of total revenue.

    Though QUNR net loss and stock drop sharply, there also good news. According QUNR's Q2 Business Outlook, expects Q2 revenue to grow 90%-95% year-on-year. An acceleration from Q1's 83.6% clip.

    Stock Price

    QUNR stock sharply drop 28% from month ago. Also below the first trading day of IPO price. The recent decline has been reflected in the Q1 results.

    Yahoo Finance Chart

    QUNR, where we go?

    Qunar, in Chinese means "Where to go?" The name as it self's business. Where to go the future? Let's consider the following factors,

    1. The QUNR Company's Q2 Business Outlook, expects Q2 revenue to grow 90%-95% year-on-year. Which means the company's basic consumer resources and previous investment can guarantee results for the second quarter.

    2. Chinese government encourages the low-cost airlines development. That is one of economic growth target of this government.

    3. China's high-speed rail ticket no fares advantage compare with cheap airlines.

    4. Under urging of international community, long-term appreciation of the China Yuan (NYSEARCA:CNY) is expected to remain unchanged. And although the CNY exchange rate has been significantly underestimated. Chinese general public still can afford low-cost air tickets.

    5. The Chinese government may stimulate the economy to ensure keep 7.5% of GDP growth at the end of this year.

    6. China's aviation market has great potential, still has three to four times growth space.

    Image from Flight radar 24 on May 17, 2014 7:00 AM UTC

    Image from Flight radar 24 on May 17, 2014 7:00 AM UTC

    Conclusion

    I do believe, QUNR is a GREAT Value Under $23 a share. The recent decline has been reflected in the Q1 results. If Q2 keep stable or growth, the share price has 40% up potential. I would recommend buying the stock for a rally to $29 and above.

    Disclosure: I am long QUNR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: QUNR
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