On September 26, the official website of the Dutch Internet investment company Prosus showed that it had reduced all its holdings in the Chinese online travel platform Ctrip Group, becoming the latest international investor to withdraw from Chinese technology companies. Compared to the previous announcement of shareholding information, Prosus has recently sold at least 30 million shares of Ctrip stock, cashing out approximately $1.6 billion.
Prosus official website previously released shareholding information
Prior to Prosus' disclosure, according to Bloomberg citing sources familiar with the matter, the company had been gradually selling shares during the summer and completed a clearance in a large transaction worth $743 million on Tuesday evening.
After the report was released, Ctrip's US stock fell 3.73% on September 25th, closing at $51.08 per share.
Prosus is not the only company that has recently reduced its holdings in Ctrip. According to SEC documents, Baidu and Ctrip CFO Wang Xiaofan also conducted transactions worth $549 million and $26.53 million respectively on September 25th, selling their ADS shares in Ctrip Group.
Since last year, Ctrip executives including Wang Xiaofan, co-founder Fan Min, COO Xiong Xing, independent director Gan Jianping, and major shareholder Baidu have made several reductions in their holdings. Among them, Baidu reduced its holdings of approximately 24.98 million Ctrip shares, with a total cash out of approximately 914 million US dollars.
According to the 2023 annual report previously disclosed by Ctrip, the number of directors and senior managers of Ctrip dropped from 11 in 2022 to 10 in 2023, and Robin Lee, chairman of Baidu, withdrew. Baidu Group Co., Ltd. remains the largest shareholder of Ctrip Group, but its shareholding ratio has decreased from 11.5% in 2020 to 9.4%.
Behind the multiple reductions in holdings by major shareholders and executives is the rapid growth of Ctrip's stock price in the past two years. Since the beginning of this year, the company's stock price has risen by 41.85%, reaching a historic high.
After the epidemic, benefiting from the strong growth of tourism demand, Ctrip's performance has shown a significant recovery trend. In 2023, Ctrip's net revenue reached 44.5 billion yuan, a year-on-year increase of 122%. The more prominent growth is in net profit, which reached 10 billion yuan for the whole year, compared to only 1.4 billion yuan in 2022.
Ctrip's second quarter financial report released in August showed a net income of 12.8 billion yuan, a year-on-year increase of 14%; The net profit was 3.9 billion yuan, a significant increase compared to 648 million yuan in the same period last year. The company stated that the performance growth is mainly due to the increasingly strong demand for holiday tourism.
However, compared to the nearly 30% increase in net income in the previous quarter, the current growth rate has slowed down. From the financial report, it can also be seen that the growth of overseas tourism business is significantly higher than that of domestic business, and domestic local tourism is gradually returning to normalcy.
With the increase of share reduction transactions, Ctrip has also announced a repurchase plan. In its 2023 annual report, Ctrip disclosed that since September 2023, the company has purchased approximately 6.8 million American depositary shares under its existing stock repurchase plan, for a total consideration of approximately $224 million. According to the regular capital return policy authorized by the board of directors in November 2023, the board approved and authorized the company to implement a strategic capital return plan with a total amount not exceeding $300 million from time to time in February 2024. The 2024 capital return plan may include annual stock buybacks, annual cash dividend buybacks, or a combination of both.
Tianfeng Securities believes that the cancellation of shares repurchased by listed companies means that these shares will no longer be traded in the secondary market and the share capital will decrease. With the current profit to dividend ratio unchanged, financial indicators such as earnings per share, return on equity per share, and dividends per share are expected to improve, thereby enhancing the intrinsic value of listed company stocks.
For Prosus, Ctrip is not the only Chinese company that has reduced its holdings. Naspers, the parent company of Prosus, is a South African multinational media conglomerate founded in 1915. In 2001, MIH, a subsidiary of Naspers Holdings' Prosus, purchased 46.5% of Tencent's equity for $32 million and became its major shareholder. Years later, this investment turned into hundreds of billions of dollars, becoming the most successful investment in the company's history and further becoming familiar to Chinese investors.
Due to Prosus' investment as its main business, its global investment has been challenged by the international environment in recent years, resulting in a sharp decline in stock prices and a serious inversion between market value and asset value. Prosus has therefore launched a long-term, open-ended repurchase program, with repurchase funds obtained through the sale of Tencent stocks.
Although Prosus has repeatedly expressed confidence in Tencent's long-term prospects, in the past year 2023, it reduced its stake in Tencent by 2%, with a market value of approximately HKD 60 billion.
In order to offset the impact of major shareholder's reduction in holdings, Tencent has also announced a large-scale repurchase plan. On March 2nd of this year, Tencent announced its proposal to distribute the 2023 annual dividend at a rate of HKD 3.4 per share, with a year-on-year increase of 42% in the dividend amount per share, bringing the total amount to around HKD 32 billion. At the same time, the amount of share repurchases will also double, increasing from HKD 49 billion in 2023 to over HKD 100 billion in 2024.
