Hillhouse Capital Management has filed an amended 13D form disclosing the increase of the fund’s position in Qunar Cayman Islands Limited (NASDAQ:QUNR) to 20.24 million Class B ordinary shares. Precisely, the hedge fund run by Lei Zhang purchased 14.52 million additional shares in Qunar, with the total position now accounting for 12.99% of the company’s outstanding common stock. Moreover, Hillhouse Capital Management disclosed that the purpose of the transaction and its interest in the company is purely related to the expected appreciation in the price of the purchased securities, which they have been very good at this year.
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Hillhouse Capital Management is a Beijing-based hedge fund founded by its current chairman and portfolio manager, Lei Zhang. This leading investment management firm was initially financed with $20 million in seed capital from the Yale Endowment in 2005. The hedge fund employs a long-term fundamental investing approach and focuses mainly on the consumer, TMT (i.e. Telecommunications, Media and Technology), industrials and healthcare sectors. Furthermore, Lei Zhang’s Hillhouse Capital Management has delivered annualized compound returns of 52% since its inception, despite a slump of 37% in 2008. Hillhouse Capital is also one of the world’s largest hedge funds and it is not strictly a local fund in spite of its Asian location. According to the most up-to-date 13F filing, Lei Zhang and his team of investment professionals at Hillhouse Capital manage a U.S public equity portfolio worth $5.48 billion, though many of those holdings are in U.S-listed, Chinese companies. One of those is JD.com Inc. (NASDAQ:JD), while the firm also has a position in U.S snack food company Mondelez International Inc. (NASDAQ:MDLZ), among other holdings.
Qunar is one of the leading Chinese online travel information providers and search engines for web-based and mobile users. The company’s goal is to assist travelers in making appropriate choices when it comes to choosing flights, hotels, and other travel-related issues. The stock has increased by an enormous 70% year-to-date and it does not seem that the increase will halt soon as the company has recently raised additional capital through its public offering of 6.53 million American Depositary Shares (ADSs) for acquiring businesses, products, services or technologies. Each ADR was priced at $47.50 per security and represents three Class B ordinary shares. Moreover, the company issued extra greenshoe options that will allow underwriters to purchase up to 315,790 additional ADSs. Unquestionably, Qunar is seeking new growth opportunities; therefore, the capital raised will allow the company to benefit from any potential strategic opportunities that come along. The future outlook of Qunar looks quite bright despite the fact that the company has not yet engaged in any discussions for specific acquisitions.
Besides, Qunar has recently received an unsolicited offer from Ctrip.com International Ltd. (NASDAQ:CTRP) to acquire the company’s outstanding shares. Nevertheless, China’s leading mobile and online travel platform declined the offer, which simply indicates that the company is confident in its future strong performance and growth. Despite the fact that Qunar has been reporting persistent losses lately, the company is considered to be one of the fastest growing online travel agencies (OTAs) in China. Only time will tell whether the losses that the company has been incurring can be reversed or not, but Qunar’s management seems optimistic about their activities and development in the Chinese market.
Finally, let’s take a quick look at the financial performance of Qunar so as to get a picture of the current financial health and sustainability of the company. The company reported total revenues of RMB671.1 million (US$108.13 million) for the first fiscal quarter of 2015 that ended on March 31, which marks an increase of 100% year-over-year. At the same time, the revenues generated from mobile devices surged by 275.7% year-over-year, reaching a figure of RMB398.5 million (US$64.21 million), representing 59.4% of total revenues. Despite the fact that the company reported a net loss of RMB701.2 million ($113.1 million), which is substantially higher than the RMB183.6 million (US$29.58 million) figure for the same period a year ago, Qunar’s management is very pleased with the company’s financial performance. The chief executive officer and co-founder of Qunar, Chenchao Zhuang, claimed that the company is one of the largest and fastest growing e-commerce companies in China and the company has delivered year-over-year revenue growth of over 100% for the fourth consecutive quarter, which surely indicates that Qunar is on the right path. Daniel S. Och’s OZ Management is one of the largest shareholders in Qunar Cayman Islands Limited (NASDAQ:QUNR), owning as much as 2.60 million shares valued at $107.23 million at the end of the most recent quarter.
Disclosure: None
