Parag Vora’s HG Vora Capital Reveals Large Stake in eLong Inc. (LONG)

The Shanghai-based Ctrip.com International, an online consolidator of hotel rooms and transportation tickets in China, purchased a 37.6% stake in eLong from Expedia for $400 million, which marks a new beginning for these companies. Vora opened a position in Ctrip.com International Ltd. (NASDAQ:CTRP) during the first quarter and is clearly backing the latest move of the company by doubling down on its newly-acquired stake in eLong. The profit margins of these companies have suffered throughout the last years as they increased marketing expenses dramatically so as to gain more market share in the Chinese travel industry. However, the two companies currently dominate the market share for top-notch hotel booking at 75%, which will give them more bargaining power when negotiating with vendors. Analysts believe that the cooperation between Ctrip and eLong will be quite handy as they become more powerful in battling the tough competition in the Chinese market. Ultimately, the recently announced deal undoubtedly improves the outlook for pricing and profits of these two companies in the above-mentioned increasingly competitive market.

Let’s take a brief look at eLong’s recent financial performance so as to assess the company’s stand-alone financial health. The company has no debt at all on its balance sheet, yielding a debt-to-equity ratio of zero, which is definitely a sign of strong financial health. During the first quarter of the year, eLong reported revenues of RMB211.9 million (US$34.2 million), which marks a 14% decrease year-over-year. At the same time, the gross margins for the same quarter decreased to 29% from the 73% figure reported in the first quarter of the prior year. However, the domestic hotel coverage network expanded by an enormous 180% year-over-year, reaching almost 280,000 domestic hotels as of March 31. Although eLong’s recent financial performance is not entirely satisfactory, the company’s cooperation with Ctrip.com International Ltd. (NASDAQ:CTRP) might spur additional revenue streams and boost its financial results in the upcoming months and years.

The largest shareholders in eLong Inc. (NASDAQ:LONG) from the pool of hedge funds we track include Paul Reeder and Edward Shapiro’s PAR Capital Management, Brad Gerstner’s Altimeter Capital Management and Daniel Gold’s QVR Financial. All of the above-mentioned hedge funds increased their holdings in eLong during the first quarter, with PAR Capital Management previously owning the largest equity stake, of 873,573 shares.

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