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Holly LaFon
Holly LaFon
Articles (9686)  | Author's Website |

Chase Coleman Sells eHi Car Services

'Tiger Cub' exits China-based car rental company

Tech investor Chase Coleman (Trades, Portfolio) exited his position in Shanghai-basesd eHi Car Services Ltd. (NYSE:EHIC), a car rental company, at a price near a near breakeven price from when he started the position in 2015, he reported Wednesday.

Coleman’s Tiger Global Management hedge fund disclosed a share purchase of eHi Car Services in the second quarter of 2015, when the stock’s price averaged around $13. He then acquired 10,528,160 shares through the first quarter of 2018 at an average share price around $12.37. With an average sell price of $12.95, Coleman ended the investment at a net gain estimated around 5%.


eHi Car Services has seen rapid growth within its business fundamentals, with revenue swelling each year since 2012 and reaching $415.5 million in 2017. Operating margins rose for the past three years to 16.5%, as did return on invested capital, which reached 4.09% in 2017.

The company struggles in its balance sheet. It has a weak financial strength score of 5 out of 10 related to its interest coverage ratio of 1.42, which is lower than 87% of the companies in the global rental and leasing services industry. This is occurring because the eHi has barely enough operating income, at $13.3 million in 2017, to service the interest expense of $8.3 million on its debt. That debt has risen annually since 2012.


eHi also has a high price-earnings ratio of 62.21, with a price-book ratio of 1.41 and price-sales ratio of 4.94.

In the second quarter ended June 30, eHi demonstrated strong growth in its fleet of cars for rent. Its average fleet size soared 21.6% year over year, with fleet utilization rate for car rentals of 72.7%, an increase from 71.1% a year prior.

Revenue generated from the car rentals and car services jumped 27.6%, as the cost to operate the vehicles rose 26.1% while depreciation and labor costs mounted.

Tiger Global Management, a firm Coleman launched in 2001 after leaving Julian Robertson (Trades, Portfolio)’s Tiger Management, focuses on fundamentals of growth companies and has a 10-year time frame for investments. It primarily invests in the global internet, financial technology and consumer sectors and was an early investor in celebrated companies like Facebook (NASDAQ:FB) and Spotify (NYSE:SPOT).

This year, Coleman has been on a buying spree, purchasing stakes in Sunrun Inc. (NASDAQ:RUN), Apollo Global (NYSE:APO), TransDigm Group Inc. (NYSE:TDG) and Bright Scholar Education Holdings Ltd. AD (NYSE:BEDU).

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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