Phuket Finance: Buy Priceline and book your visa run

PHUKET: Just the other day I had a client ask me how he can save some money on his next visa run. He wants to explore more of Southeast Asia and has gotten tired of making the usual trip to Cambodia, Laos or Kuala Lumpur.

That’s when I told him about Priceline.com. Priceline (PCLN) is the famous “Name Your Price” website in the United States. Here in Asia though, we use the Priceline subsidiary, Agoda.com, for hotels and in Europe they use Booking.com.

I have used Agoda.com to explore the Philippines, Bali, Malaysia and Vietnam. Each time I was saving anywhere from 10% to 50% on hotel rooms. The best part is that I got cash rewards for each booking and was able to redeem them on my other trips.

I’ve gotten free weekends from my reward travel. Those rewards come in handy for an expat that has to make a visa run and is looking to save money. Phuket currently has 1,117 hotels listed on Agoda ranging in price from US$20 to $1,800 dollars per night.

Priceline.com operates as a one-stop online destination to serve all your travel needs. You can book flights, hotels, car rentals, vacation packages and cruise trips. The company’s Agoda.com provides hotel reviews and lets you know the key attractions for each city before you book.

Personally, I use Agoda.com only for booking hotels. My last trip to Kuala Lumpur found me too busy to book a room in advance. I had the taxi take me to Bukit Bintang and drop me off in front of some moderately priced hotels. At the desk the price was $90 per night. Standing at the front counter I went online, which took me three minutes, and booked the same room on Agoda for $52. A 42% savings! The desk clerk had a big smile on his face as I handed him my reservation number.

Actually the best part about Priceline has been the stock performance. Over the past eight years, the stock has risen an astounding 3,000%. I have owned it since 2007 and it has been my best performer after Netflix. I still think the stock is going higher and here’s why: the company is best positioned among the online travel companies for the international market.

• Priceline.com is acquiring the US travel software company Kayak.com

• The company is trading with a cheap forward P/E (price/earnings) of 15 and has a 35% operating margin

• Priceline has $103 per share in cash and the stock is trading above both the 50 and 200 day moving averages

• Booking.com is the #1 online site for European hotels

• Up to 80% of the company’s profits come from international travel the company continues to take market share from Expedia and Orbitz

• Priceline is using pricing power to negotiate hotel rates for customers

• Subsidiaries traveljigsaw and rentalcars.com have strong growth in car rental market

• JP Morgan raised its target on the stock to $835 and Jeffries upped theirs to $820

• Priceline has beat earnings estimates for 12 straight quarters

• The stock has a PEG ratio of 0.95, anything less than 1 is undervalued

Priceline.com is currently trading at $713.50 with a 52-week range of $553 to $774. The stock has dipped recently because its Kayak acquisition will close later than expected. Kayak will give a big boost to the company’s bottom line due to Kayak’s metasearch software.

Metasearch allows users to send requests to other search engines and databases to get a single list of results. This acquisition will put Priceline ahead of its rivals Expedia and Orbitz.

The technical picture looks great. Priceline.com gained over 50% in 2012 and has been forming a quiet consolidation for 12 months. Often leadership stocks will post strong price gains (50 to 100%) then fall asleep for 6-12 months before heading higher once again.

The one uncertainty overhanging the stock is Europe. Many analysts are worried that Europe may stay in recession longer than expected. The recovery that many had hoped for this year has yet to materialize. Uncertainty with the recent Italian elections and Cyprus bailout aren’t helping to calm markets either.

I’m not as concerned as others though, considering the company has weathered the storm very well for the past five years that Europe has been in crisis. Bookings in Europe have been rather consistent and considering that only 25% of the European hotel market is online, there’s plenty of room for growth. Priceline has less than 10% of total hotel bookings in Europe. There’s considerable room for growth in Europe and people are still traveling to Europe and making hotel reservations.

Besides penetrating the European hotel market further, the fastest growth for Priceline is in Asia, the Middle East and Latin America. These regions have a burgeoning middle class that want to travel. Among the online travel sites, Priceline is best positioned in the growing $600 billion international travel market.

So when the time comes to make your next visa run or when you need to just get a break from Thailand, take a look at Priceline.com and one of their sites. They can help save you up to 50% and if you’re looking at Priceline for your next investment, give me a call and we can discuss the merits of putting Priceline in your portfolio.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand.

He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com.

— Don Freeman