FAST NEWS: Mid-sized U.S. Investor Increases Tongcheng Travel Stake

The latest: Mid-sized U.S. fund manager Brothers Harriman & Co. disclosed it purchased 7.155 million shares in Tongcheng Travel Holdings Ltd. (0780.HK), raising its stake to 5.3%, above the 5% threshold that requires it to disclose its holdings, according to a new Hong Kong Stock Exchange filing.

Looking up: Despite reporting a loss in the first-half of the year, Tongcheng’s growing investment from Brothers Harriman probably reflects the shareholder’s confidence in the company’s prospects.

Take Note: Brown Brothers Harriman previously reduced its stake in Tongcheng by 326,000 shares on Aug. 22, the day the company announced its interim results, lowering its stake to a 4.98%. So its sudden reversal just a month later may raise suspicions about its motives.

Digging Deeper: Tongcheng Travel, which operates an online one-stop travel platform, became the second largest online travel agency in China after its merger with Elong in March 2018, just behind Trip.com (TCOM.US; 9961.HK). It was listed after an IPO in Hong Kong in November 2018. Benefiting from the huge demand for travel from Chinese residents, Tongcheng has been able to record net profits every year since its IPO. But the company’s revenue fell 19% to 3 billion yuan ($424 million) in the first half of the year, and it recorded a loss of 38 million yuan due to widespread Covid-related closures in several major cities that affected tourism across the country earlier this year.

Market Reaction: Tongcheng’s shares closed 3.4% lower on Friday at HK$14.62 at the midday break. The stock currently trades in the middle of its 52-week price range.

Translation by Jony Ho

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