The company has authorized the investment of $1.3 billion in cash in a variety of non-U.S. investment entities that operate in China, the Shanghai-based Internet travel company said in a statement.
This investment will acquire a "significant minority stake" in Qunar, which is a mobile and online commerce platform for travel in China, Ctrip said.
Ctrip holds about 45% of Qunar's aggregate voting interests, according to an SEC filing that was updated on Tuesday.
"Qunar has historically incurred net losses," Ctrip said in the filing. "Our results of operations may be materially and adversely impacted if we treat our acquisition of Qunar's shares as a business combination and consolidate Qunar's financials while Qunar is still incurring net losses."
Ctrip stock is down by 4.55% to $42.56 in mid-morning trading on Wednesday.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate QUNAR CAYMAN ISLANDS -ADR as a Sell with a ratings score of D. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and generally high debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- QUNAR CAYMAN ISLANDS -ADR's earnings per share declined by 11.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, QUNAR CAYMAN ISLANDS -ADR reported poor results of -$2.53 versus -$0.24 in the prior year. For the next year, the market is expecting a contraction of 588.1% in earnings (-$17.41 versus -$2.53).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Internet & Catalog Retail industry average. The net income has significantly decreased by 25.3% when compared to the same quarter one year ago, falling from -$92.25 million to -$115.62 million.
- The debt-to-equity ratio is very high at 2.91 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, QUNR's quick ratio is somewhat strong at 1.45, demonstrating the ability to handle short-term liquidity needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, QUNAR CAYMAN ISLANDS -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for QUNAR CAYMAN ISLANDS -ADR is rather high; currently it is at 64.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, QUNR's net profit margin of -55.45% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: QUNR