On June 11 the board of directors of China’s HomeInns Hotel Group (HMIN), once known as Home Inns and Hotels Management, announced that it had received a proposal to take the company private from a group of investors that includes the cofounder and chairman of the company, and Chinese Internet travel site Ctrip (CTRIP) at a purchase price of $32.81 a share.
That puts HomeInns Group in the middle of a rush by Chinese companies listed on U.S. markets (HomeInns trades as an ADR in New York) to go private as the initial step in a process that will get these stocks listed back in China. The reason is pretty simple: Shanghai shares are up some 60% in 2015 while U.S. listed ADRs of Chinese companies lag. (HomeInns is up 6.76% for 2015 as of June 12 but was down 10.31% for the year as of May 31 before the bid.) In the week that ended on June 12, four Chinese companies trading in New York announced bids to take them private. That brings the June total to seven—more than the five proposals announced by Chinese companies with U.S. listings from January to May of 2015
The ADRs of HomeInns have climbed to near the proposed buy out price, closing today at $32.83. I think the bid is likely to succeed and given the involvement of one of the company’s founders I don’t see a bidding war breaking out that would drive the price higher. (The bidding group already owns 35% of the company’s shares.) I will be selling these shares out of my Jubak Picks portfolio tomorrow June 16. I’ve got a 20.2% gain in the shares, which were added to the portfolio on March 13, 2012. (And speaking of that and other Jubak Picks portfolios, they will (Amazon’s hosting servers willing) be back on line at JubakAM.com on Wednesday, June 17.)
Holding HomeInns has been frustrating lately. (Well, actually pretty much since I bought it in 2012.) The company is a likely big beneficiary of the increasing incomes of Chinese consumers and their ability to travel and of the rebalancing of the Chinese economy away from manufacturing and infrastructure investment toward consumer goods and services. But the ADRs have had trouble pushing much above $35 on a sustained basis even as more speculative Chinese stocks trading in China in such hot sectors as ecommerce (really anything Internet), finance, and real estate have soared.
If you concluded that U.S. listed ADRs have tended to trade on fundamentals whereas Chinese stocks traded on the Shanghai and Shenzhen exchanges have traded on the vast expansion of retail trading accounts and a huge increase in margin loans, I wouldn’t argue with you. I think what we’re seeing in this wave of private deals is an attempt to arbitrage the lower prices of U.S. listed stocks and the higher prices in Shenzhen and Shanghai. Company and industry insiders are trying to get these deals done before prices of U.S. listed ADRs climb.
I think your best move here is to take advantage of their enthusiasm.
We’ve been down this road with Home Inns and Hotels Management (HMIN) before. Which doesn’t make it any less scary.
The stock is down 22.2% in the last ten days—despite solid but certainly not spectacular results for the fourth quarter reported on March 12.
The recent sell off on worries about a slowdown in China’s economic growth pretty much mirrors the January plunge on China and emerging market worries. Then the shares fell 23.7% from December 31 to February 3 before rebounding, along with emerging market shares in general, by 15.1% from February 3 to March 4.
When China’s markets slump and fear rises, Home Inns and Hotels Management is sold early and hard because 1) as the big dog in the mid-to-low end of the lodging market in China the company is seen as very exposed to shifts in growth in China’s economy, and 2) because the stock is so liquid that it is easy and cheap to sell at the slightest worry—and easy and cheap to rebuy when the trend shifts.
I don’t know if that makes Home Inns and Hotels a swing trade for you—it shows the volatility and (perhaps) the predictability of a good swing trade—or if you’ve got the cast iron constitution that will let you hold through this kind of volatility, but in either case you should still care about the most recent fundamentals. So let me run through them here. (Home Inns and Hotels is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ .) Read more
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/