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Ctrip’s quarterly profit drops 25 pct amid fierce competition

Ctrip.com International, which runs one of China’s major travel booking websites, Wednesday (US time) reported a 25 percent drop year-on-year in the net profit for the quarter through March amid domestic fierce competition in the country’s booming online tourism market.

In the first quarter, the company’s net profit was 115 million yuan ($19 million), falling for three consecutive quarters, according to a financial report posted on the NASDAQ. Its revenue jumped 36 percent year-on-year to 1.6 billion yuan.

Analysts attributed the profit slide to huge spending on promotion and acquisition over the period.

According to the financial report, total operating costs hit 1.06 billion yuan, a surge of 52 percent year-on-year. And expenses on sales and marketing activities in the first quarter increased by 61 percent to 430 million yuan from last year.

“Being confronted with increasingly heated rivalries in China’s online tourism market, Ctrip poured lots of money and effort into marketing so as to maintain its current leading position,” Wei Changren, general manager with Beijing-based Jinlü Consulting, told the Global Times Thursday.

Major Chinese online travel booking websites such as Ctrip, eLong and Qunar started a price war with each other last year, in an attempt to capture a leading position in the promising online tourism market, which is expected to reach 465.01 billion yuan in 2017, more than twice the figure of 220.46 billion yuan in 2013, read a report by Beijing-based market research company iResearch.

In July 2013, Qunar, backed by Baidu, one of China’s leading Internet companies, reportedly announced a promotion for hotel reservations during the summer vacation, offering clients 25 percent discounts on hotel room fees.

In December, Ctrip kicked off a similar activity for the whole month with up to 30 percent discount on room charges.

Ctrip also spent 200 million yuan on promotional efforts for its resort ticket purchase business in the first quarter of 2014, according to media reports.

Despite huge costs in marketing, the company still made a series of investments in its peers recently, indicating that its cash flow is in fairly good condition, Yang Yang, an industry analyst with iResearch, told the Global Times Thursday.

Ctrip is now ly.com’s second largest shareholder with the acquisition of a 30 percent stake in this Suzhou-based attraction ticket service provider for $200 million in late April.

It is also one of the anchor investors for Nanjing-based travel website tuniu.com in connection with its proposed IPO, eyeing tuniu.com’s edge in leisure package tour business.

According to financial reports, Ctrip has never suffered losses after getting listed in the US market, while its major rival Qunar has yet to turn into profitability. The NASDAQ-listed Qunar recorded a loss of 187 million yuan in 2013.

But Yang said that Qunar will threaten Ctrip’s predominant position in the OTA (online tourism agent) segment in the near future, as the former is starting to tap the market and has a stronger ability to bargain with off-line hotels and airlines due to support from Baidu.

Baidu is Qunar’s major shareholder, owning 61.05 percent of the company.

The OTA market, where online tourism websites run businesses like off-line traditional tourism agents, is promising, which was led by Ctrip in the first quarter with 51.9 percent, according to iResearch.

ELong came in second with 9.3 percent, ly.com ranked third with 6.2 percent.

Both Yang and Wei noted that Ctrip’s investment in peers could help it gain access to their user bases and even tap their competitive resources.

But the latter integration and cooperation may not go through smoothly, as its rivals may just want the capital injection and be unwilling to share core resources and technology with Ctrip, Yang said.

China has world’s 3 largest companies: Forbes

China became home for the first time to the world’s three biggest public companies and five of the top 10, according to the Forbes Global 2000 List released on Thursday.

Industrial and Commercial Bank of China (ICBC) held onto its No.1 spot for a second year, followed by China Construction Bank and Agricultural Bank of China.

The other two were Bank of China — another of the “Big Four” Chinese banks — and PetroChina, ranking ninth and tenth, respectively.

Chinese mainland and Hong Kong added 25 to the 2014 list, more than any other country, for a total of 207.

The United States accounted for the other half of the top 10 spots, and held onto its crown with 564 companies on the list. Japan trailed the U.S. with 225 companies in aggregate, despite losing 26 members this year.

The magazine said its Global 2000 is a comprehensive list of the world’s largest and most powerful public companies in terms of revenues, profits, assets and market value.

The 2014 list hailed companies from 62 countries, up from 46 in its inaugural 2003 ranking. In total, these companies raked in revenues of 38 trillion U.S. dollars and profits of three trillion with a market value of 44 trillion.

“The list presents an annual snapshot of the ever-changing global business landscape,” the magazine wrote.

Job Listing Site Zhaopin Is The Latest Chinese Company To File For A U.S. IPO

Zhaopin, China’s biggest job recruitment site, has filed for an initial public offering on the New York Stock Exchange under ticker symbol ZPN. It plans to raise up to $100 million.

Companies that stand to benefit from the IPO include Seek International, Australia’s largest online job site, which owns a 79% stake in Zhaopin, and Cavalane Holdings, which holds 19.3%.

Zhaopin was founded in 1994 and had 74 million registered users as of 2013 and about 10.5 million job postings from 250,000 unique customers in the fiscal year ending June 2013, when it recorded $147 million of revenue. Most of that amount, or 84.3%, came from its online recruitment business.

Its filing is one of several Chinese tech companies that will or are expected to hold U.S. IPOs this year. The most notable is Alibaba, China’s biggest e-commerce firm, which is expected to hold its IPO soon. Its public offering may value Alibaba at more than $100 billion.

Microblogging platform Sina Weibo also recently held its IPO (though its value fell after censorship by the Chinese government) and Alibaba rival JD.com is reportedly planning a U.S. offering for later this year.

The high profile of these companies mark a turnaround in investor sentiment toward Chinese stocks listed in the U.S. since 2012, when share prices fell after several firms pulled out of the U.S. stock market in response to accusations of improper accounting by regulators.

As Re/code’s Kara Swisher noted in an article about Alibaba’s imminent IPO, investor interest in Chinese tech stocks also runs counter to their U.S. counterparts, including Box, which recently delayed its own IPO.

Zhaopin is raising funds as its competition increases in China. According to TechNode (TechCrunch’s partner site in China), the top three job listing and recruitment sites in the country are Zhaopin, 51job, and ChinaHR.

For example, LinkedIn entered the Chinese market in February. Though China is a notoriously difficult market to tap for foreign tech companies, LinkedIn already had four million registered Chinese users from 80,000 different companies on an English-language site that had been accessible in the country for 10 years before its official launch.

As part of its official launch, LinkedIn told TechCrunch’s Ingrid Lunden that the company had formed a joint venture with Sequoia China and CBC to expand its business in the country and develop localized services. For the company, China presents a potential market of 140 million professionals, or about one in five of all knowledge workers globally, according to LinkedIn CEO Jeff Weiner.

Zhaopin also has to contend with several domestic challengers that have attracted investor attention by focusing on specific markets. These include Liepin, an executive recruiting platform that landed a $70 million Series C round in April; Neitui, an IT job site; and RenRen Headhunting, a crowdsourcing recruiting app.

Alibaba files for IPO in US

Alibaba Chairman and Non-executive Director Jack Ma.

China’s e-commerce giant Alibaba has filed initial public offering (IPO) document to the U.S. Securities and Exchange Commission (SEC) with plans to raise one billion U.S. dollars, according to SEC information and well-informed sources.

Announcing this in an internal communication to employees, founder and chairman of Alibaba Ma Yun said, “Becoming a listed company has never been our goal. It is a tactic and means to realize our mission.”

In its filing Alibaba gave no date for the proposed IPO or whether it would be on the New York Stock Exchange or Nasdaq. It cited its advantageous placement in a nation in which e-commerce is fast becoming a way of life, as Chinese consumers turn to the Internet to buy innumerable items.

Noting that being listed in the United States will expose Alibaba to chanlleges in the global financial market, Ma said,”Not all companies have the opportunities to face such global chanlleges. We are honored to be one of them.”

Analysts said the one billion U.S. dollar is only an initial figures and that the actual amount could be much bigger.

Often described as a combination of EBay and Amazon, Alibaba handled $240 billion of merchandise in 2013. With more than 7 million merchants, it has more than $2 billion in revenue and profit of more than $1 billion.

Alibaba’s sheer size could weigh on the stock price of US rival Amazon.com if the Chinese company’s shares are added to indexes and portfolios targeting e-commerce and related sectors, analysts said.

“Amazon simply doesn’t measure up to the size of Alibaba’s earnings and earnings growth rate,” analyst Robert Wagner wrote.

Alibaba’s announcement continues a flurry of IPO filings by Chinese technology companies. Internet security application developer Cheetah Mobile is expected to go public on the New York Stock Exchange on Thursday in an IPO expected to raise $153.75 million to $178.35 million. Tuniu, an online tour-booking website, plans to hold an IPO Friday on the Nasdaq Stock Market in a $120 million IPO.

Three weeks ago, Weibo Corp, the Chinese micro blogging service owned by Sina Corp and Alibaba Group Holdings Ltd, raised $285.6 million in a Nasdaq IPO while real-estate listings website Leju Holdings Ltd raised $100 million in an initial offering on the NYSE.

“The key question for China is how much new money, if any, Alibaba will raise in this US IPO,” said Peter Fuhrman, chairman and CEO of Bejing-based China First Capital.

If all the cash goes to Japan’s Softbank and US’s Yahoo, then it’s hard to see how Alibaba, its customers and the hundreds of millions of Taobao-addicted Chinese consumers will benefit from the IPO. US web-portal company Yahoo is a 24 percent Alibaba shareholder, while Japan’s Softbank has a 37 percent stake.

ChinaHR jobs recruitment firm may float in Hong Kong

ChinaHR, the fast growing Asia-focused recruitment company owned by Leslie Buckley and Denis O’Brien, is mulling over plans to float in Hong Kong.

Buckley told the Sunday Independent that an IPO was “one of the options” being considered by the group in coming years. He noted that the investment in China was “a long-term play”.

ChinaHR, formerly Saon, sold its European operations to Stepstone for around €76m last year. Its core Chinese business is forecast to grow by 60 per cent this year, having placed 1m jobs. Denis O’Brien owns 75 per cent of the recruiter, and chairman Buckley the other 25 per cent.

“One of the reasons we decided not to sell it to Stepstone was there was still plenty of heavy lifting to be done, which would see more value created over the next two years,” Buckley added. This would give the firm further bulk, should it consider raising money on stock markets.

Some of the proceeds of the sale of its European operations will be reinvested in the Chinese operations, according to Buckley. “We’ve already put in about €60m,” he said. The company may need between €20m and €40m more as it moves towards profitability over the next 18 months.

The company employs 2,600 staff in 26 cities across China, though it has a reach into 180 cities.

The acquisition of rival Monster.com in early 2013 catapulted ChinaHR into the number three slot in the competitive Chinese recruitment market. The market leaders are 51 Jobs and Zhaopin. Buckley indicated that ChinaHR was about half the size of Zhaopin, which plans to raise $200m in an IPO this year.

“There’s a lot of small companies setting up every day there. The consolidation will come and we’re in a very good position,” Buckley added.

ChinaHR may seek acquisitions of between €2m and €10m as it continues its growth spurt. “We’re always looking at acquisitions and we have an open mind.”

While further buyouts may be on the cards, the sheer size of the Chinese jobs market means that there are enormous opportunities for organic growth. “We have moved into other products. We were about 90 per cent online, now we’re about 55 per cent online and 45 per cent off line,” Buckley said.

Forecast for foreign trade appears grim

Canton Fair, China’s largest trade fair, is held every spring and autumn in Guangzhou. Guangdong’s trade value dipped sharply in March.

Imports and exports in Guangdong province, which account for nearly a quarters of the country’s trade, will face more pressure this year after the southern economic powerhouse reported a sharp drop in trade numbers during the first three months, local government officials say.

Guangdong’s trade value fell by 25.2 percent year-on-year to 1.36 trillion yuan ($217 billion) in the first quarter, with exports falling by 22.4 percent to 794 billion yuan, according to provincial customs data.

The customs authorities forecast a grim trade outlook for exporters in the province, especially in the booming Pearl River Delta, and say they will face more challenges due to an unstable global market and increased domestic labor and production costs.

In March, Guangdong’s trade value dipped by nearly 38.6 percent year-on-year to 471 billion yuan, according to customs officials.

Lin Jiang, head of the public finance and taxation department of Lingnan College at Sun Yat-sen University in Guangdong, says that the lower trade numbers are a grim reminder that the province needs to change its economic growth model by upgrading industries and boosting domestic consumption.

Before the big trade drop in the first quarter, local authorities had set a trade growth target of just 1 percent in 2014.

Guangzhou, the provincial capital, also expects a lower trade growth target of 3 percent this year as the city will give priority to transforming its economic structure to focus on large investment projects.

Last year, Guangzhou’s exports grew by 6.6 percent from 2012 to $62.8 billion, with actual use of foreign investment reaching $4.8 billion, according to the local government.

“The lower growth target, together with the sharp trade drop in the first three months, signals that Guangdong will no longer rely heavily on trade to maintain economic growth,” Lin says.

Setting a lower trade growth target means that Guangdong has to develop new growth engines to sustain its leading role in the country’s economy, Lin adds.

Guangdong’s economy has taken pole position nationally in the country since the reform and opening-up process started. Last year, its GDP grew by 8.5 percent from 2012 to surpass $1 trillion.

In the past five years, Guangdong reported negative trade growth only in 2009, a year after the global financial crisis.

In 2013, Guangdong’s import and export value increased by 10.9 percent from a year earlier to $1.09 trillion, according to a provincial government work report.

The province’s export value increased by 10.8 percent year-on-year to $636.5 billion last year, the report says.

Guangdong will strive to increase domestic consumption by promoting Guangdong-made products across the country and will continue to optimize investment structure this year, according to the report.

Citing the first quarter statistics, Lin says Guangdong’s trade structure has changed a lot, from heavily relying on processing trade in the past to high-tech and value-added exports.

“The trade structure is improving and a growing number of exporters have turned to innovation-driven trade,” Lin says.

In sharp contrast to the processing trade, which reported a 22.6 percent decline year-on-year, Guangdong’s general trade in the first three months increased by 13.9 percent year-on-year to 550 billion yuan.

Manufacturers in the Pearl River Delta, a major manufacturing and trade hub in Guangdong, also expect a bleak trade outlook in the months ahead.

Zeng Zhaoyang, a manager at the trade department at Guangdong Hopeful Electric Co, says the company reported a loss both in export value and business profits in the first quarter of the year.

“The fast export growth in the 1990s is long gone. Now we are struggling,” Zeng says.

The company, a home appliance maker based in Foshan, Guangdong, reported a 10 percent year-on-year drop in exports last year, according to Zeng.

Stiff competition and increased labor and production costs have also squeezed business profits in recent years, Zeng says.

“We have to boost research and design investment and develop more product varieties for overseas markets so that we can stay profitable,” he says.

A total of 2,000 exporters in Guangdong surveyed in a recent report by the Shenzhen-based Onetouch Business Service Co reported an export increase of only 1.44 percent year-on-year in the first three months of 2014.

However, Zhu Xiaodan, governor of Guangdong, said during the annual local legislative meeting in January that the province would maintain stable trade growth this year by introducing a series of measures to encourage local companies to better tap the international market.

“We will develop varieties of international markets, support local exporters to participate in overseas trade events, cultivate more overseas sales channels and carry out cross-border e-commerce for sustainable trade growth,” Zhu says.

China’s first mobile virtual operator launches business

T.Mobile, a unit of Telephone World Digital Group, on Sunday became China’s first mobile virtual network operator (MVNO) to offer wireless voice and data services.

Currently, the services, wholesaled from China Telecom, are restricted to Hangzhou, capital of east China’s Zhejiang Province, but they will expand to other parts of Zhejiang later, the company said without elaborating.

MVNOs do not own telecommunications infrastructure but provide services through network access they have leased at wholesale rates from another mobile operator.

Telephone World Digital Group is one of 19 companies, mostly privately owned, that have received mobile virtual network operator licenses. The companies also include subsidiaries of e-commerce giant Alibaba, and retailers Suning, JD.com and D.Phone.

Several other virtual operators are also expected to begin services soon. Suning and D.Phone started taking pre-orders for their telecom services on May 1.

Zou Xueyong, secretary general of the Industry Association of the Mobile Virtual Network Operators, said the mobile virtual network operators are expected to bring a “catfish effect” to the country’s telecom industry, improving prices and services through competition.

“The virtual operators will help push forward reforms in the telecom industry and drive down prices of telecom services,” Zou said.

However, many industry insiders remain cautious.

An executive from an MVNO, who declined to be named, said the virtual operators are not expected to bring about sweeping changes to the industry, which is dominated by three state-owned basic telecom operators — China Mobile, China Unicom and China Telecom — due to their unequal relations.

It might take a long time before people accept the virtual operators, he said.

The virtual operators will each need 1 million active subscribers to reach the break-even point, said an executive with China Telling Communications who declined to be named.

Sony sells VAIO PC unit

Sony Corporation (Sony) and Japan Industrial Partners Inc (JIP) on Friday announced that Sony and a business arm of JIP have entered into an agreement regarding the sale of Sony’s personal computer (PC) business operated under the VAIO brand, Sony said on its website.

Following this agreement, Sony’s PC business, which is operated in Japan under the VAIO brand, and certain related assets will be transferred to the JIP subsidiary.

Top Chinese dairy company reports 84 pct growth in 2013

Yili Group, China’s largest manufacturer of dairy products, reported net profits of 3.2 billion yuan ($520 million) in 2013, up 84.4 percent from the previous year, according to its yearly report released on Tuesday night.

Yili took in 47.78 billion yuan in sales revenue last year, according to the report.

Yili’s major rival Mengniu Group had sales revenue of 43.36 billion yuan in 2013 with net profits of 1.63 billion yuan, according to its yearly report.

Yili’s strong performance was boosted by its integration of global resources and upgrade of products and research, said Chen Lianfang, a dairy industry analyst.

The company reported net profits of 1.088 billion yuan in the first quarter of this year, up 121.8 percent year on year.

Its baby milk powder plant in New Zealand, with an annual production capacity of 47,000 tons, is expected to begin operation in June, according to Zhang Jianqiu, executive president of Yili.

Yili inaugurated its research and development center at Wageningen University this February in the Netherlands, becoming the first Chinese dairy R & D center in Europe.