JD Capital: Hidden behind UTS Travel with A Book Return of 1200% in Three Years
2014-03-10
By February 26th, UTour Travel (“UTour”), the first stock of private travel agency listed on January 23rd, has recorded 10 limit ups with stock price soaring over 90 yuan at one point and a rise of nearly 300%.
With the rigorous rising momentum of its stock price, UTour has been suspended and for three times, releasing self-inspection announcement in accordance with the listing rules. Listed for one month, UTour is named as IPO King and the first “Bull Demon King” in the start of the year of Horse within the industry.
According to the prospectus of UTour, JD Capital, the well-known PE firm, is one of the shareholders of UTour Travel. Data shows that Beijing Jiali JD Capital Center under JD Capital increased its capital in UTour Travel on November 19th, 2010, subscribing 8.75% of UTour’s total shares and becoming its second largest shareholder.
After the IPO, JD Capital now holds 3,825.1 thousand shares, accounting for 6.56% of the total. Taking into account of previous dividends and share expansion, its cost of UTour is 6 yuan/share. Based on the closing price of 79.8 yuan on March 7th, the book value of the shares that JD Capital owns reaches 305 million yuan, which mean 12300% of book returns. Before this, it was Gifore Agricultural, one of the first batch of stocks listed on GEM, that brought JD Capital a return ratio over 1000%. UTour was another lucrative star project of JD Capital after Gifore Agricultural.
Mr. Zhao Feng, co-partner of JD Capital, remarked during his interview with Securities Daily, that it is the basic investment principle of JD Capital to select BEST of the best. “When we first invested UTour in 2010, its predicted profit of the year was 300 million yuan. Yet we were optimistic of the growth prospects of tourism industry as well as the competitive edge that UTour earns in outbound tourism.”
Statistics shows that UTour is a travel agency focusing on outbound tourism, with main businesses featuring wholesale of outbound travels, retail of outbound travels and business award tourism, which contributed 59%, 24% and 17% respectively to the total revenue of UTour in the first three quarters of 2013. From 2009 to 2013, the compound growth rate of its overall revenue and net profit were 40.3% and 53.5% respectively.
According to the research report of Citic Securities，from the aspect of industrial development, the compound average growth rate of the Chinese population travelling overseas from 1995 to 2012 reached 20%. It is forecasted by WTTC that the compound average growth rate of tourist going overseas till 2020 will be 15%. In 2012, the revenue of domestic travel agencies from outbound tourism was 93.6 billion yuan and the total outbound tourist population was 28.3 million with a 40% increase from that of 2011. The development of out-bound business of domestic travel agencies in the future will substantially benefit from the robust growth of China’s out-bound tourism market.
The research report of Citic Securities reckoned that though the industry of travel agencies in China is facing fierce competition and low concentration, leading agencies with strong capabilities in resource control, product R&D and overall operation shall obtain large development with the rapid industrial development.
It was shown in several research reports from brokers that the development prospects of out-bound tourism and continuous rapid growth of UTour’s results were the main reason for UTour’s popularity.
There is another big context for JD Capital’s harvest in UTour, namely restart of IPO. According to the statistics from CVSource, since the restart of IPO in A-share market, 48 enterprises have launched their IPO. In January 2014, there were 35 Chinese enterprises with VC/PE backgrounds listed, recording an average book return of 444% for institutional investors. In February, there were 4 Chinese enterprises with VC/PE backgrounds listed, recording an average book return of 367% for institutional investors. Institutional investors, trapped by the IPO suspension for more than a year, finally embraced their harvest season.
With regards to the shift towards IPO Registration System, Mr. Zhao Feng remarked that the reform of registration system would urge institutional investors to pay more attention the growth prospects of the enterprises and only those who digs into the underlying value of enterprises and offers good value-added service would bring investors with abundant returns. “Our next move is to continue the search of the NEXT UTour.”