China stock pick Home Inns beats on earnings

The budget hotel chain then lowers its guidance for rest of 2013.

By Jim J. Jubak Aug 12, 2013 7:50PM

Image: Couple Entering a Hotel Room © Fuse/Getty ImagesHome 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. By tweaking the mix of company owned and operated new hotels versus franchised hotels it plans to open in 2013, to include more franchised operations with their higher profitability, Home Inns and Hotels expects that it will be able to meet former earnings guidance for 2013. Wall Street currently projects the company will grow earnings by 27% for the year.


The new hotel development plan envisions opening 400 new hotels in 2013 with 330 to 335 of those to be franchised.


I wouldn’t be surprised if the New York traded ADRs sell off Tuesday on this news. I’m not happy that the company has lowered revenue guidance -- but I am glad to see this Chinese company managing for earnings, rather than blindly going for growth. I’d buy on the dip.


As of Monday I’m keeping my target price at $37 share. Home Inns and Hotels Management is a member of my Jubak’s Picks 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, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own not shares of Home Inns and Hotels Management as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio.


MSN Money on Twitter and Facebook

Like us on Facebook: MSN Money and Top Stocks

Follow us on Twitter: @msn_money and @topstocksmsn

Tags: HMIN
1Comment
Aug 13, 2013 9:18AM
avatar

if that picture reflexs their typical bed or sleeping arraignment, i'll never go there with my wife or GF

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.