Klook goes against the flow with U.S. listing plan

The Hong Kong-based online travel agent targeting young consumers is reportedly planning to file soon for a New York listing that could raise up to $500 million

Key Takeaways:

• Klook is preparing to file for an IPO, which could be the biggest by a Chinese company in the U.S. this year since Chagee raised $475 million
• The listing could value the Hong Kong-based, youth-focused online travel agent at more than $3 billion

By Doug Young

Who says Chinese companies no longer want to make blockbuster IPOs in the U.S.?

Not Klook Travel, a Hong Kong-based online travel agent, which is reportedly preparing to apply for a U.S. listing that could raise up to $500 million, Bloomberg reported on Thursday. If it materializes, such a deal could become the biggest listing by a Chinese firm on Wall Street this year, challenging premium milk tea chain Chagee (CHA.US), whose listing in April ultimately raised about $475 million.

Klook, whose name is a shortened form of “keep looking,” hasn’t commented on its fundraising plans, though its talkative co-founders have previously said they would like to list in Hong Kong or New York and could make such a listing at any time. Media reports, including the latest from Bloomberg, have previously said the company would like to raise anywhere between $300 million and $500 million.

The company is currently working with financial advisors, and could make its first confidential filing with the U.S. Securities and Exchange Commission soon, according to the Bloomberg report. Its U.S. listing would be somewhat contrarian, coming as Chinese companies increasingly abandon New York IPOs in favor of Hong Kong.

Klook certainly has the credentials to chase such big fundraising, which would likely value the company at $3 billion or more. Two of its three co-founders come from investment banking backgrounds, and its list of backers includes some top global investors. What’s more, its co-founders are millennials who understand the millennials and Gen Z travelers who are their target customers.

That could position the company as a new hip and trendy alternative for young travelers looking for more than what’s on offer from stodgier, more established online travel agents like global giants Booking Holdings (BKNG.US) and Expedia (EXPE.US), as well as leading Chinese sites Trip.com (TCOM.US; 9961) and Tongcheng (0780.HK).

Klook hasn’t given much financial information in the past, except to say that its revenue passed $3 billion in 2023, and it also became profitable that year as people engaged in “revenge travel” following three difficult years during the pandemic. Its website offers support for 22 different global markets, including the U.S., Mainland China and Hong Kong, as well as most major European and Southeast Asian countries and India.

It hasn’t provided any revenue breakdowns for those various markets, though previous reports have indicated it focuses on travel in the Asia region.

While it’s only now coming to market, Klook is actually a relative old timer on the global travel scene, founded in 2014. Co-founder Eric Gnock Fah, who appears to be the company’s main public face, previously worked at Morgan Stanley before co-founding the company with Ethan Lin, who worked at Citibank, and Bernie Xiong.

Goldman Sachs is one of the company’s investors, alongside other big names including Japan’s SoftBank and HongShan, formerly known as Sequoia China. It’s conducted eight funding rounds to date, raising more than $1 billion. The latest of those was in February this year, when it raised $100 million from Vitruvian Partners. Previous reports said the company passed the $1 billion valuation mark in 2018, though that was pre-pandemic.

$3 billion valuation?

Reports after the latest funding didn’t give a valuation from that event. But $3 billion or more looks likely, given the reported IPO fundraising targets and fact that all of Klook’s major global rivals trade at price-to-sales (P/S) ratios well over 1. A similar ratio to Expedia, which has a similar profile and trades at a P/S of 1.8, would value Klook at more than $5 billion, based on the company’s $3 billion sales figure from 2023.

From our perspective, Klook looks like an interesting investment proposition due to its relatively unique positioning as a company targeting younger travelers, who are often more interested in the travel experience than their specific destination.

While such young travelers have less income than older ones, they are typically more willing to spend for experiences they think will be emotionally satisfying. Such a willingness is quite visible in China, presumably one of the company’s top markets, based on the big amounts of money people spend on the “goods economy,” which includes things like dressing up as their favorite anime characters and splashing out on pricey collectible toys.

Klook leans heavily on social media to attract such youth, who spend large amounts of time on services like TikTok and Instagram in many western markets, and Douyin and RedNote in China. A key strategy is its use of online influencers, or key opinion leaders (KOLs). The company has previously said it works with more than 20,000 such influencers, who can earn commissions and sponsored trips through such collaborations. It also has a partnership with TikTok that allows people to make bookings directly on the popular video app.

Of the company’s roughly 70 million monthly visitors in 2023, around 70% were millennials and from Gen Z.

In terms of size, Klook is already relatively large among the field of global online travel agents we’ve mentioned. Based on 2023 revenue figures, it’s roughly twice the size of Tongcheng, which mostly targets China travelers and is highly reliant on a relationship with domestic internet giant Tencent. It’s about half the size of Trip.com, which has been China’s leader for years. But unlike Trip.com, which likes to talk about its global expansion but rarely gives out revenue figures for that part of its business, Klook appears to already be more globally diverse.

The company is still relatively small compared to Expedia and Booking Holdings, which it presumably sees as major rivals in terms of their global business footprints. Expedia earned more than four times more revenue in 2023, while Booking earned seven times more.

The bottom line is that Klook looks like quite a fresh and interesting new play in the online travel space. Its base in Hong Kong gives it a unique entrée to the China market, but at the same time also distances itself from a Chinese government that makes many consumers outside China increasingly uneasy. Its focus on younger travelers and use of social media are also strategies that set it apart, and could position it to thrive in the future as such users get older and their spending power increases.

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