Tongcheng eLong, which has two exclusive third-party services in Wechat, is about to go public.
On June 21, Cheng Yilong submitted a prospectus to the Hong Kong Stock Exchange and officially launched the IPO program, with co-sponsors Morgan Stanley, JPMorgan Chase & Co and China Merchants International.
Tongcheng Yilong was formed by the merger of Tongcheng Network and eLong Travel Network, a subsidiary of Tongcheng Travel Group, in December 2017. the two companies were mainly engaged in providing booking services for travel products such as hotels, air tickets and vacations. After the merger, Liang Jianzhang, chairman of Trip.com, and Wu Zhixiang, chairman and CEO of Tongcheng Travel, are co-chairmen of the new company.
If Cheng Yilong's IPO application is approved, it is expected to become the first mainland online travel stock listed in Hong Kong. Next, I will take an inventory of the main points of the listing of Yilong in the same journey for you.
The twists and turns of the road to listing
Long before the merger of Tongcheng and eLong, the two companies had long been looking forward to IPO.
In 2004, Yi long was listed on NASDAQ.
In 2015, Tencent issued an offer to buy eLong's tradable shares at US $18 per share.
In 2016, eLong was officially privatized and delisted from the Nasdaq stock market in the United States.
Jiang Hao, CEO of eLong, once said in an open letter that the Chinese securities market has a huge valuation premium compared with the US securities market. It is an irreversible trend for local enterprises to be listed in their own country. After privatization, Yilong will continue to become bigger and stronger and be listed again in the domestic capital market.
After another protagonist Tongcheng also received 10 million-level investment from Tencent in 2012, it was reported that the same trip planned to be listed on the Shanghai and Shenzhen growth Enterprise Market, but later the gem window was closed and the listing plan of the same journey came to an end.
At the beginning of 2014, Wu Zhixiang, CEO of Tongcheng, revealed to the media that Tongcheng was going to be listed in the United States, and after Trip.com invested in April, he also supported Tongcheng to complete IPO by the end of the year. However, as another shareholder in the same process is a state-owned enterprise, there are many problems to be dealt with in the design and listing process of VIE, so the listing plan is shelved again.
June 2015, the same trip announced the completion of a new round of financing, Wanda, Tencent shares. At that time, Wu Zhixiang once again revealed to the media: the same journey network IPO has entered the preliminary preparatory stage, law firms and securities firms have entered the market.
In June 2016, the structural adjustment of the same trip was announced, which split the same trip into travel agencies (groups) with leisure and holiday tours and scenic destinations as the core, and a network with air tickets, hotels, train tickets and other standard items as the main business. At that time, Wu Zhixiang revealed that "the same journey network does not rule out faster access to the capital market through backdoor methods."
When the business was split on the same journey, the market heard the news that it would merge with eLong. At that time, some analysts believed that this was to bind the business, plus to promote the IPO process of the same network, but this news was flatly denied by the same journey.
It was not until the last working day of 2017 that the rumors of a merger between the two companies finally settled: Tongchuan formally merged its profitable Tongcheng network and eLong Travel Network into a new company, "Tongcheng eLong". At the time of the merger, the two sides announced in a high profile that with the common support of all shareholders of the new company, the process of entering the capital market with Cheng Yilong will be greatly accelerated.
Financial position: profitable before merger
According to the prospectus, Tongcheng and eLong maintained rapid growth for three consecutive years before the merger, and both made a profit in 2017. In 2017, Tongcheng Yilong had a total revenue of 5.226 billion yuan and an adjusted annual profit of 685 million yuan.
Among them, eLong Group achieved income of 2.519 billion yuan in 2017, annual profit of 194 million yuan, income of 2.707 billion yuan and annual profit of 491 million yuan for online business.
In 2016, Yilong Group achieved an income of 2.205 billion yuan and an annual loss of 2.161 billion yuan, while its online business achieved an income of 1.435 billion yuan and an annual loss of 73.034 million yuan.
Revenue share: eLong depends on accommodation booking and transportation ticketing on the same trip.
From 2015 to 2017, accommodation booking business accounted for 88.5%, 95% and 93.8% of total revenue, respectively.
From 2015 to 2017, traffic ticketing business accounted for 87.8%, 94% and 91.2% of the total revenue, respectively.
The number of users is growing rapidly, and 65.7% of the users come from Tencent platform.
According to the prospectus, the combined average number of monthly active users of Tongcheng and eLong increased from 88.7 million in 2015 to 121.2 million in 2017, with a compound annual growth rate of 16.9 per cent. Over the same period, the combined paying users of Tongcheng and eLong increased from 3.9 million in 2015 to 15.6 million in 2017, with a compound annual growth rate of 99.6 per cent.
According to the prospectus, in 2017, most of Tongcheng Yilong's monthly active users and monthly paying users came from Tencent's platforms. The combined average number of monthly active users of Cheng Yilong from Tencent platform increased from 7.6 million in 2015 to 79.6 million in 2017, with a compound annual growth rate of 223.6 per cent. This figure accounts for 65.7% of the site's overall monthly active users in 2017.
At present, Tongcheng Yilong's main business includes transportation ticketing and accommodation booking, Tencent's platforms such as Wechat mobile payment interface "wallet" train tickets, air tickets and hotel entrances, QQ mobile payment interface QQ Wallet train tickets and hotel entrances, as well as a number of other entrances to mobile QQ, proprietary Mini Program is an important online platform for Tongcheng Yilong. Tongcheng Yilong also offers separate websites and Android and iOS applications.
Shareholder composition: Tencent first, Trip.com second
In terms of shareholding ratio, Tencent is the largest shareholder with 24.92%, while Trip.com is the second largest shareholder with 22.88%.
Risk factors from Tencent
In 2017, Tongcheng Yilong had revenue of 1.519 billion yuan, an increase of 14.24 percent over 2.205 billion yuan the previous year. The cost of sales in the same period was 812 million yuan, a decrease of 21.39% compared with 1.033 billion yuan in the previous year. As a result, gross profit margin rose sharply, from 53.15% in 2016 to 67.77% in 2017.
In addition, the Group spent 1.095 billion yuan on sales and marketing expenditure in 2017, a decrease of 788 million yuan compared with 1.883 billion yuan in the previous year, of which advertising and promotion expenditure alone decreased by 1.001 billion yuan over the same period.
The realization of turning losses into profits has a lot to do with the entry provided by Tencent, the major shareholder, which has reduced the cost of obtaining users.
Tongcheng Yilong also mentioned in the prospectus that its greater dependence on Tencent has become one of its major operating risk factors. But he also mentioned the good mutually beneficial relationship with Tencent.
Trip.com may be the biggest winner.
Although Tencent is the first shareholder of Cheng Yilong, Trip.com may be the biggest winner.
On the one hand, Trip.com has completed the transformation from the second largest shareholder in the same journey and the largest shareholder in eLong to the major strategic shareholder in the new company, and is expected to get a higher return on investment after the company goes public.
On the other hand, the combined Cheng Yilong and Trip.com 's own market share will help Trip.com to further consolidate its position in the online travel market.
Source: iResearch data
Source: iResearch data
(editor: Huaguang charlie)
