Maintain ‘reduce’ on Make My Trip: Nomura

By: |
February 27, 2016 12:08 AM

Make My Trip (MMYT) in Jan 2016 had raised $180 million in convertible debt from Ctrip (CTRP, Buy; covered by Jialong Shi), the largest OTA in China.

Make My Trip (MMYT) in Jan 2016 had raised $180 million in convertible debt from Ctrip (CTRP, Buy; covered by Jialong Shi), the largest OTA in China. MMYT currently has cash of $265 million. This could imply that the competitive intensity in the OTA space could continue to remain high, consistent with our thesis published in our Downgrade to Reduce note on MMYT dated 23 February 2016, titled “High competitive intensity makes us cautious”.

As per ibibo Group’s CEO Ashish Kashyap, “The commitment from both Naspers and Tencent to ibibo is testimony to the strength of our platforms and the opportunities ahead.”

We maintain Reduce on MMYT based on our thesis that high competitive intensity could continue for 1.5-2 years and that, while transaction growth could continue to be healthy driven by significant discounting/promotions, this would likely lead to pushback in profitability to FY19F (vs. earlier assumptions of FY18F) and higher-than-expected losses in FY16/17F at $1 per share. We would re-evaluate our stance when we start to see some semblance of rationality returning to the market.

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