The New York traded ADRs of China’s Home Inns and Hotels Management (HMIN) have climbed 15.5% from September 24 to the close on October 11.
Part of the reason is a October 10 recommendation from Goldman Sachs that added the ADRs to its top pick list. And part of the reason is a huge surge in domestic travel during China’s recently concluded National Day holiday week. (Home Inns and Hotels Management is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )
Goldman’s call is based on a belief that China’s economy is picking up speed again. As the economy recovers tourism and business travel pick up and budget chains, of which Home Inns and Hotels is the largest in China, see occupancy rates climb. That in turn pushes up the all-important RevPAR (revenue per available room) numbers.
But huge growth in travel and tourism during the National Day holiday also demonstrates the potential in China’s domestic travel and hospitality sector. Tourism revenue climbed 21% to 223 billion yuan ($36.4 billion) during this year’s National Day holiday from the same holiday in 2012, according to the China National Tourism Administration.
You didn’t need a market researcher to see the trend during the October 1 to 7 holiday. Just counting heads would do. Read more
Home Inns and Hotels Management (HMIN) reported second quarter earnings and revenue above analyst projections-and then lowered guidance for the full 2013 year.
Earnings of 47 cents a share (excluding one-time items) were 3 cents a share above the Wall Street consensus. Revenue climbed 10.5% year over year to $261 million against the $250.3 million consensus.
Below the top line numbers the company reported good news on the integration of the 281 hotels it acquired from Motel 168 in May 2011. Occupancy rate at the Motel 168 properties improved to 82.1% from 80.8% in the quarter, although that still trailed the 87% occupancy rate for the company as a whole. RevPAR (Revenue per Available Room) improved by 2.3% at the Motel 168 properties to 132 renminbi. For the company’s hotels as a whole RevPAR climbed to 145 renminbi in the quarter. That was better than the 131 renminbi in the first quarter but below the 149 renminbi in the second quarter of 2012.
Guidance for the third quarter and for all of 2013 is likely to disappoint the market, however. The company lowered its projections for revenue to a range of 6.35 billion renminbi to $6.5 billion renminbi from May guidance for a range of 6.6 billion renminbi to 6.8 billion. For the full year the company now projects revenue growth of 10.1%-12.7% versus an earlier projection of 14.4%-17.9%.
However, the company left its earnings projections at former levels. Read more
Home Inns and Hotels Management (HMIN) announced first quarter earnings today, May 13, of 4 cents a share (excluding one-time items). That was 9 cents a share better than the 5 cents a share loss projected by Wall Street analysts. Revenue climbed 11.7% year over year to $225.8 million, well above the $219.2 million consensus.
The quarter continued the turnaround that was visible in the company’s fourth quarter results.
The company saw a slight drop in RevPAR (revenue per available room) to $131 in the quarter from $132 in the first quarter of 2012. But revenue grew as occupancy rates climbed to 83.6% in the quarter from 80.7% in the first quarter of 2012.
The big story, though, continues to be the improvement at the Motel 168 chain the company acquired in 2011. For the quarter RevPAR for Motel 168 improved 4.5% year over year and the occupancy rate climbed to 76.7% from 70.4%.
In its guidance the company affirmed its target to open 360 to 380 new hotels in 2013, including 80 to 90 leased-and-operated hotels and 270 to 300 franchised-and-managed hotels. Total revenue in 2013, the company projected, would fall between 6.6 billion and 6.8 billion renminbi. That would be equal to growth of 14.4% to 17.9% for 2013 over 2012.
As of May 13, I’m raising my target price on the New York traded shares of this Chinese hotel company to $37 a share from my current target of $34. Home Inns and Hotels Management is a member of my Jubak’s Picks http://jubakpicks.com/the-jubak-picks/ 12-18 month portfolio.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Home Inns and Hotels Management as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
So now what?
We’ve had a December sell down on fears that the United States would go off the fiscal cliff—the Dow Jones Industrial Average was off 2.48% in the fourth quarter.
We’ve had a huge pre-New Year’s move—the Standard & Poor’s 500 Stock Index climbed 1.7% on December 31 on hopes that the crisis would get resolved and an even bigger January 2 move on an actual “solution. The total gain comes to 4.3% for the two sessions.
But where does the market go from here? I think you can guess, right? After all we did go through this pattern of sharp rallies and deep retreats in 2012.
So with the benefit of that experience, let me give you my seven steps for the first half of 2013. Read more
If the fiscal cliff does deliver a buying opportunity, here are 10 stocks for putting money to work in 2013
While we’re waiting for Congress and the President to come up with a deal to extend the Bush tax cuts, avoid automatic spending cuts, fix (again) the alternative minimum tax, keep the Social Security withholding tax break, and extend extended unemployment benefits, let’s think for a minute about what happens if there is a deal.
If sometime in the next few days or more likely at some point in January or at a worst case sometime in February, there is a deal, the financial markets get to breathe a big sigh of relief. We might even see a rally—of exactly the sort that you raised some cash for during this past week or so.
What would you look to buy? What’s a reasonable list of 10 best stocks for 2013?
The stocks part is simple I think. It’s the 2013 part that’s hard.
As in 2012, macro trends will drive the financial markets in 2013. In 2012 the year—and the markets—were defined by fears that China’s economy would slow to a hard landing, that the U.S. economy would stall or that the U.S. government would prove so dysfunctional that the country would default on its debts, and that in the EuroZone Greece, Spain, or Italy would fall into financial chaos.
When those worries moved to the top of investors minds, financial markets fell. When those worries receded and it looked like the financial world wasn’t headed off one cliff or another, financial markets rallied.
Two things should worry you as we head into 2013.
First, if you look past the worries about the U.S. fiscal cliff, investors, Wall Street, and economists are actually relatively optimistic as 2012 ends and 2013 begins. That’s the big reason that stocks—especially U.S. stocks haven’t sold off heavily on continued bad news about negotiations—or the lack thereof—on the financial cliff. Consider this story that crossed the wires just about a week ago: Corporate earnings in China will climb by 10% in 2013, according to Russell Investments, and Goldman Sachs raised its economic forecast for China for 2013. Why is this a worry? Because some stocks and some markets are starting the year discounting a hunk of good news and that lays the foundation for disappointment. It’s important to remember that once we get past the fiscal cliff, 2013 could still turn out to be disappointing.
Second, it’s likely that the narrative for 2013, like that for 2012, isn’t going to unroll in a straight line. We’re likely to be disappointed to learn by the end of 2013 that the EuroZone “solution” for Greece doesn’t work, and that the U.S. economy just can’t seem to build up enough speed to generate gobs and gobs of jobs. And to get giddy when we learn that China’s growth has reaccelerated to 8.5% and that the auto industry is back (and not just in the United States.)
So what do you do with a year like 2013? (To be sung to the tune of “How do you solve a problem like Maria?”)
I think you divide your 10 best stocks for 2013 into three parts. Read more