Overview: Tiger Global Management's 1Q14 positions

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Overview: Tiger Global Management's 1Q14 positions PART 2 OF 8

Why Tiger Global starts new position in Avis Budget Group

Tiger Global starts new position in Avis Budget Group

Tiger Global Management’s latest 13F shows new positions in Avis Budget Group Inc. (CAR), Zillow Inc. (Z), and Trulia Inc. (TRLA). The fund sold stakes in Yahoo! Inc. (YHOO) and Amazon Inc. (AMZN). It raised positions in Vipshop Holdings (VIPS) and Charter Communication (CHTR).

Why Tiger Global starts new position in Avis Budget Group

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Tiger Global initiated a new position in Avis Budget Group (CAR) that accounts for 2.58% of the fund’s 1Q14 portfolio.

Avis Budget Group provides vehicle rental and car sharing services. It operates three of the most recognized brands in the industry through Avis, Budget, and Zipcar. It’s one the leading vehicle rental operators in North America, Europe, Australia, New Zealand, and other regions. The company saw total revenues of $7.93 billion in 2013.

Avis Budget Group’s brands

Its brand “Avis” is a leading rental car supplier positioned to serve the premium commercial and leisure segments of the travel industry. “Budget” is a leading rental vehicle supplier focused primarily on more value-conscious segments of the industry. The Zipcar brand, acquired in 2013, is the world’s leading car sharing company, with more than 860,000 members in the United States, Canada, and Europe. Avis Budget Group also operates Budget Truck, one of the leading truck rental businesses in the United States, with a fleet of approximately 23,000 Budget trucks. It also owns Payless, a car rental brand acquired in 2013 that operates in the deep-value segment of the industry, and Apex, which is a leading deep-value car rental brand in New Zealand and Australia.

Why Tiger Global starts new position in Avis Budget Group

North America drives 1Q14 results

Avis Budget Group’s 1Q14 results topped market estimates. The car rental company reported revenue of $1.9 billion—a 10% increase compared to the first quarter last year. Adjusted EBITDA increased 26% to $117 million. The company reported generally accepted accounting principles (or GAAP) net income of $4 million, or $0.03 per share. This was in comparison to a loss of $46 million or $0.43 per share for the same period last year. The management was cited as saying, “Our strong first quarter results were driven by volume growth and increases in both leisure and commercial pricing in North America.” North American revenue increased 13% primarily due to the acquisitions of Zipcar and Payless Car Rental. There was a 4% increase in volume and 2% higher pricing, excluding Payless. International revenue increased 7% primarily due to a 3% increase in rental days, a 1% increase in total revenue per rental day, and the acquisition of Zipcar. Truck Rental revenue declined 1% due to a 3% decrease in volume because Avis’ truck rental fleet was 14% smaller in 2014.

The car rental space saw consolidation last year with Avis buying Zipcar and Payless Car Rental, while rival Hertz Global Holdings Inc. (HTZ) acquired Dollar Thrifty.

Avis expects full-year 2014 revenue of approximately $8.4–$8.6 billion, which is a 6–8% increase compared to 2013.

Avis benefits from “Tuck-in” acquisitions

In February, Avis  acquired its existing Budget Car & Truck Rental licensee in Edmonton, Alberta, Canada to expand its footprint while capturing a larger share of Canada’s domestic, international-inbound, and truck rental spending. In February, the company also re-acquired the license rights to the Budget Car Rental brand in Portugal and now directly operates both the Avis and Budget brand in Portugal.

Shares surge on launch of Pay Now express lane option in March

Shares went up in March after the company announced the Pay Now express lane—a new expedited check-out service for customers who utilized the “Pay Now” option on Avis.com or Budget.com to pay for their rentals in advance to lock in discounted rates. Avis said it has invested in its website infrastructure to improve response time and enhance the user experience for visitors to its mobile websites and to Avis.com and Budget.com. It also launched new Avis and Budget mobile applications for travelers on the go, “with accelerated response times and compelling new features.”

It recently announced expansion of its consumer car sales program to Massachusetts, Ohio, and Tennessee. The car sales program “is part of Avis Budget Group’s strategic objective to drive efficiency throughout the organization and accelerate growth, by maximizing the proceeds from risk car sales.” In collaboration with AutoNation, the consumer car sales program offers potential buyers a no-haggle, no-hassle process and features a wide selection of late-model Avis and Budget rental vehicles for purchase at competitive prices.

Drives shareholder value by authorizing further share buyback

In April, 2014, Avis increased share repurchase authorization by $235 million. As of March 31, 2014, the company repurchased a total of 3.2 million shares for approximately $125 million under the $200 million share repurchase program authorized in August, 2013. It also completed an approximately $275 million debt refinancing in March.



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