Category: China

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China Stocks

Checked in Home Inns Again

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I mean the stock (HMIN), not the motel because I am in the US now. I know it was a little speculative, but I think it’s ok to put 20% of my “mad money” into this even after the amazing run from $22 to as high as $34. I think there are many reasons account for this.

1) It has more than 100% year to year revenue growth; it’s opening new hotels like crazy. Initially I was a bit concerned with this kind of growth in China and I talked to a friend in 2nd tier city in China. My worry is the affordbility of RMB 180 room rate in 2nd tier or inland cities because the wages in coast cities are much higher than inland cities. It seems not a big problem. On the other hand, I think they (Rujia) got better rate for real estate and labor in those cities; in other words, I believe they can maintain the profit margin.

2) The analogy of China/US top chain hotel market share: top 10 US hotel chains have 60% US market share; currently top 10 China hotel chains have 6% of the China market share. This got many people excited about its potential growth. I noticed from Yahoo Finance that there are two articles on WSJ on this lately (although I have not read it). I heard about the following rule to spot the top of a stock: when a company (and its founders/CEO) is mentioned in all these business magzines, it may be at peak. But I think Home Inns is not there yet. Hotel is pretty boring concept in the US. Wall Street analysts just started to get excited on this.

3) From consumer point of view, I think it’s attracting people who used to stay at 3-star hotels (high end) and Zhao Dai Shuo (low end). 3-star hotels in China used to cost RMB400, but with promotion now you can get it for little more than 200. The Zhao Dai Shuo cost less than 150, but they don’t get private bathroom, free Internet…I think Home Inns got a lot business travellers from both of them.

In summary, I know I made a mistake by selling it too early, but it’s not too late to buy HMIN at its current price (32.50 to 33). Yes, from traditional valuation point of view, it’s insane to buy a stock with PE of 160 . But remember at one point, was Google a stock like that? The most important is, they need to deliver the growth as expected.

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China Stocks

More about Home Inns and Mindray

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Home Inns (HMIN) and Mindray (MR) both reported their Q3 earning last week. I listened to both the conference calls. HMIN obviously did better with revenue growth: RMB 160.4 m, 106.3% year over year growth. Mindray’s revenue growth was 21.6% because of the anti-corruption campaign in Chinese hospitals. I think that growth factor determined the stock PE ratio at this time, HMIN is 162, MR is 51.

Personally I think one quarter’s number could be misleading. So let’s look at the first 9 months number. Mindray revenue growth is 41.4%; Home Inns is 125% (from RMB 176 m to RMB 396 m). So once again HMIN is the winner here. The reason again is HMIN is growing like crazy these days. They opened 25 new hotels in Q3 and have 56 hotels in development. But I still have some doubts in its growth.

1) Home Inns room rate RMB 180 is not expensive in China coastal area (where it got started), it could be a bit expensive in central and western part of the China, when we consider the wage difference here.

2) Competition: it’s heating up. Besides Jinjiang Star, Motel 168, Super 8, Home Inns’s founder Ji Qi started another chain called Hanting, which is slightly expensive than Rujia (Home Inns), and targeted business travellers.

So the question is: will HMIN’s growth be sustained for a while? My bet is their brand will help them grow for a while, but like anything else in business, nothing can grow 100% forever 🙂 

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China Technology

China Software Companies II

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A commond question about China software industry is: while China leads India on hardware, manufacturing and many other aspects, why is she behind India on software? After all, Chinese are smart people too. Well, the main reason, I think, is China has domestic demand for software, while India has to compete with the western developed countries (US, UK) for the projects. Or put it in another way, when Chinese companies enjoyed the relatively “easy money” for relatively simple domestic projects, Indian companies are swimming in the ocean, fighting with bigger fish such as IBM to get the food. The result? 20 years later, when Chinese companies are still swimming in the Eastern China sea, their Indian counterparts already landed in New York, LA, and London. This is not to dismiss the effort of Chinese software companies’ growth, which I will talk about later. Let me talk a little about Chinese domestic demand for now.

In the late 80s, there were need for companies and goverment agencies in the accounting area. The companies wanted to use computer to keep track of things. The goverment wanted to standarize things so that their life will be easier (collect tax etc). Two guys (incidentally, both accounting major) started developing the software: Wang Wenjing founded UFSoft in Beijing and Xu Shaochun founded Kingdee in Shenzhen. Later on they both evolved into ERP software vendor. It’s a natural extension from accounting to ERP, because “accounting” covers a great deal of the business: from planning, budgeting, to sales, revenue and cost. Today both companies are leaders among domestic ERP vendors; and UFSoft is bigger than Kingdee. But foreign vendors such as SAP and Orcale are getting the high end of the markets, due to their product strength and better relationship with multinational companies.

We know ERP certainlly is not the only game in the town, but China software companies essentially did start on this application. Some other companies such as Hangzhou’s Sunyard developed software for the banks; Dong Ruan (NeuSoft) started software outsourcing in Shenyang and Dalian. They both grow into big players. Meanwhile, there are many smaller shops which has 20 to 100 people and they develop custom software and provide consulting services for specific industries.            

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China Technology

China Software Companies I

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I thought about this topic for a while; I decided to start it after seeing the recent hypes on E-future stock. E-future claims it is the first Chinese software company listed in the NASDAQ Capital Market. This is correct but it is a bit misleading. There are two markets in NASDAQ: National Market and Capital Market. Capital market is for small capital companies; and most Chinese companies such as Netease and Home Inns (Ru Jia) are listed in the National Market. The reason I mentioned this is there are at least two Chinese software companies in the NASDAQ right now: China.com (CDC Corp) and Ninetowns. You may say many Internet companies such as Baidu, Sina, Netease and Sohu are also developing software, why don’t I categorize them as software companies?

Well, in this discussion I define software companies as the companies that develop software and sell them to the end users (mainly enterprises), by licensing (Microsoft) or sell them as a service (Salesforce); and sometimes they derive majority of revenue from support and service (RedHat). In other words, as much as we like Google and Baidu, and their fantastic technology, they are not considered as enterprise software companies. In addition to companies that develop software (and have intellictual property), I will also discuss some software outsourcing companies in China. Because they also do enterprise software development or customization for companies like Microsoft or Oracle; and they provide consulting services for the end users sometime.

When I talk to people about enterprise software in China, the most frequent word I heard is “ERP”, or enterprise resourcing planning. It seems to many people that ERP is the only thing in enterprise software world. This is obviously not true. But on the other hand, I think it is also the first area computer (software) is used in the Chinese companies. UFSoft (Yong You), one of the largest software company in China, got started in Accounting and ERP software about 15 years ago. Interestingly, about 12 years ago I wrote a foxBase program to manage the cost accounting for my first employer in Shanghai. To be continued…

UFSoft

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Business China

B2B Developments in China

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B2B, business to business, was a popular concept in dot com era. The idea was to connect the companies (suppliers, OEM, vendors…) using B2B software. In those days, there are a few B2B software companies such as Commerce One flied high. But B2B never grew as big as people dreamed in the US. On the other hand, Alibaba, the China company connecting Chinese manufacturers with foreign buyers, was very successful. The bar raised again recently as more players joined the party. One of them, is the Ninetowns (NINE), the company provides software for importing and exporting in China. The following is I saw from Andy Yu’s blog (in Chinese, see below).

We all know in business especially foreign trade, trust is very important. Essentially TooToo is creating its own rank system for the Chinese exporters. They have the raw data when providing the software and services for Chinese companies, and the rank is based on those data. When foreign buyers see an exporter is certified by TooToo, or “China Qualified Supplier”,  they can worry less about the quality etc. TooToo (Ninetowns) essentially is trying to create a credit report for the Chinese suppliers.

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China Stocks

Basics for Investment

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I happened to see this “Investment 101” from forun web site, a very small (boutique) research firm. Wish I had read it before jump into market 3 years ago. Oh well, I know even if I read it, I would forget it and make the same mistakes. A lot times we have to learn the lesson the hard way.

It’s an interesting story to find this research firm. So I was listening to the conference call of Ninetowns, the stock I bought at its IPO and bought it again today. An analyst from forun called in and talked in English with a heavy Chinese accent. Sometimes when he got stuck, he used Mandarin with strong Hunan accent . The CEO of Ninetowns can not speak English. So they talked in Mandarin. Another SVP of Ninetowns did the translation. There are only two analysts called in for the questions. The other guy Dick Wei from JP Morgan, is also ethnic Chinese. Note JP Morgan was the underwriter of its IPO in Dec 2004.   

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Business China

Mindray Medical International

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OK, enough about the Home Inns (HMIN) and New Oriental (EDU), both of which are well known consumer brands based in Shanghai and Beijing respectively. On Sept 26, a not so well known medical device company based in Shenzhen (by Hongkong), did IPO on NYSE and it was well received by the investors. The company is Mindray Medical International, ticker symbol MR. It’s not the first Chinese medical device maker listed in the US. China Medical (CMED) came to NASDAQ about a year and half ago. But this MR is much bigger.  I looked at its F-1 form, and it seems like a solid company.

mindray logo picture 

Some key numbers:

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Categories
China Stocks

China Net Companies Q3 06 Earning Calendar

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It seems all these China stock bloggers are taking vacations 🙂

Click on the date it will bring you to the “events” page of the stock; you can add the event to your “Yahoo Calendar” if you like.

Baidu: Nov 1 (Oct 31 evening US time)

Ctrip: Nov 8

Netease: Nov 6

Sina: Nov 2

Sohu (done): Oct 26

China Medical: Nov 13

Mindray Medical: Nov 16

Home Inns: ???

Categories
Career China

Engineers Needed

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Saw this from haiguinet, I thought it’s a good one. The original article is here.

=================================================

深圳美企诚聘

找人真难,急煞老总!!!深圳美企诚聘品质工程师, 制造工程师,ERP / JD Edward 实施顾问
各位大侠有好人选可以推荐给我们吗?
我们公司不差,条件不低.可几个engineering level 的职位找了一年了,不知为何就是找不到人.
看来,制造业已经不是一将难求了,好兵帅克都难找啊!难道所有的人都跟着安校长去做了投行?

全球最大的消毒类一次性医疗仪器和耗材的供应商，现诚邀有潜质之精英加盟本公司：

1、Quality Engineer（品质工程师）
理工科本科以上学历；3年以上医疗器械行业, 或电子,五金, 注塑行业QA工作经验，了解医疗器械行业质量体系标准ISO13485及其它相关法规者优先考虑；良好的团队合作精神与沟通协调能力；英文读写良好，电脑操作熟练。
2、Manufacturing Engineer（制造工程师）
理工科本科以上学历；有三年以上注塑、五金方面的工作经验；曾从事过工装夹具的设计，会熟练使用Auto CAD；有医疗器械行业工作经验，熟悉医疗器械行业者优先考虑；良好的团队合作精神与沟通协调能力；英文良好，电脑操作熟练
3、ERP / JD Edward Implementation Consultant (ERP / JD Edward 实施顾问)
两年以上JDE Enterprise one系统实施经验，熟悉JDE ERP系统设计及数据库，能独立设计实施方案并带领实施完成，英语熟练，能用英语与美国同事沟通，有在JDE公司工作背景者优先考虑。财务、制造模块实施顾问要求有良好的财务、制造流程知识及工作经验
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It appears to me good engineers (mechanical, electrical, etc.) are badly needed in China these days. Besides designing and manufacturing, procurement is also a big one. I heard a guy took a procurement job in Shanghai and went back recently.

Categories
China Stocks

Stock Lesson VII

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Next Microsoft. Next Bill Gates. Next Google. Next…

We all want to get the hold of “next big thing” before it becomes real, don’t we? Think about this, the stock of Cisco, the networking and communication company, increased 73 times from 1990 to 2000 in 10 years. The Microsoft stock’s performance was similar. 

From time to time, when a young company came up with some cool product or service, and performed well in the market and financially, people will praise it as “next Microsoft”, and think its founder will be next Bill Gates. The reality is, except Google, no company has come close to Microsoft in past 10 years. But sometimes we innocent investors (like me) fell into this trap.

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