Analysts expect this Indian online travel company to grow at an annual rate of 56.9% over the next five years.
MakeMyTrip Limited (MMYT)
From Cabot Global Stocks Explorer (formerly Cabot Emerging Markets Investor)
China’s Internet platform has spawned dozens of scalable companies, many of them listed on the NYSE. But don’t forget about India. Amazon has invested close to $4.7 billion in building its e-commerce operations in India. Retail sales in India are close to $700 billion but only 10% of this is organized retail. Small mom-and-pop stores operate the rest. Amazon made an entry in this region in 2013 and has built a strong delivery network. It is also heavily investing in Amazon Pay, the digital wallet platform.
It seems smart to have some exposure to the fastest growing major economy in the world, as well as booming South Asia tourism. And our new recommendation seems the best-positioned company to capitalize on all these favorable trends.
Founded in 2000 to serve the travel needs of the U.S.-based Indian community, MakeMyTrip Limited (MMYT) has evolved into a leading travel company as India evolves into a digital marketplace by providing a comprehensive range of travel and travel-related services.
MakeMyTrip has made key acquisitions and strategic partnerships and its strong balance sheet should allow it to continue expanding its dominant market share. One key alliance is with Ctrip, China’s largest online travel group. In 2016, Shanghai-based Ctrip invested about $180 million in MakeMyTrip, gaining it one board seat. Ctrip recently announced that it intends to raise its position in MakeMyTrip to 49% in a share swap deal with Naspers. Ctrip wanted even more shares but decided to stay under the 50% threshold to avoid regulatory scrutiny and political issues.
MakeMyTrip also has a 43% a year compound annual growth in gross merchandise value processed during the past few years but is not yet profitable.
India’s economy is growing at a 7% clip—a bit faster than China’s—and its population is on a path to surpass China as the world’s most populous country sometime in the next decade. Travel and tourism is the nation’s third largest foreign exchange earner contributing almost 10% of GDP and 8% of total employment. India’s total travel and tourism investment is 3rd globally and a record-breaking 10 million foreign tourists travelled to India in 2017. The Indian Government seeks to double this in 2020.
Despite the surge of foreign tourist arrivals, the domestic travel side of spending of $186 billion in 2017, 3rd largest in the world, accounted for 87% of direct travel and tourism GDP. And as discretionary incomes and GDP per capita in India continue to trend upwards, these numbers and MakeMyTrip’s potential earnings and profits will also grow. The government has also become more open to foreign investment in this sector and now permits 100% foreign investment in the hotels/tourist industry attracting $49 billion in capital investment in 2017 alone.
According to a recent McKinsey report, data costs in the country have fallen by 95% since 2013 and total online users will grow by another 40% to cross 750 million by 2023, driven by the continued adoption of smart phones.
Summing up this huge opportunity, industry experts forecast that India will become the third largest aviation market by 2022 and there are plans to double the number of operational airports over the next 20 years. BUY A HALF.
Carl Delfeld, Cabot Global Stocks Explorer, www.cabotwealth.com, 978-745-5532, July 11, 2019