I’m sorry being a flip-flopper here, because I was bullish on its stock until last Thursday. But like many things in life, I think sometimes it’s worthwhile to have a second look, this is especially true on investment. It’s no good to hold on a stock “no matter what”, or “fall in love with a stock or a company”, because we don’t want to throw away our hard earned money. At least I don’t.
I got some more Home Inns (HMIN) today. Nothing fundamental has changed at Home Inns, as I said in my previous post.
Separately, Ma Yun, the big mouth at Alibaba, speaks again. We all know he likes to brag about how great will Alibaba become, but this time he is saying “China does not have a pure Internet company”. Duh? How about Baidu?
Here are the results. I listened to Home Inns Q1 conference call (see the scripts here).
Some of the positives:
1) Revenue growth 65% Year over Year. Profit did not follow because of foreign change loss, tax expense and share based compensation. Note the foreign exchange loss won’t be one time as they continue moving the IPO money (in USD) to China (RMB), and you know these days the USD depreciates (wrt RMB) non-stop.
Mindray (meeting announcement): 8:00 PM on May 14, 2007 U.S. Eastern Time (8:00 AM on May 15, 2007 Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:
Hong Kong: +852-3002-1672
US Toll Free: +1-866-271-6130
International: +1-617-213-8894
Passcode for all regions: Mindray
Home Inns (meeting announcement): 9 PM on May 21st, 2007 U.S. Eastern Standard Time (9 AM on May 22nd, 2007 Beijing/Hong Kong time). Dial-in details for the earnings conference call are as follows:
China Mainland (toll free): 10.800.130.0399
Hong Kong: +852.3002.1672
U.S. and International: +1.617.213.8893
Pass code for all regions: HOME INNS
This is a too big question. But I have thought this thing for quite a while, and want to share my thoughts. A few weeks ago I was watching the “Boss Town” program at China-CBN, the host posed this exact question to the founder of Qiao Xing (Nasdaq: XING), Mr. Wu Ruiling: why do you go to Nasdaq considering the overhead of compliance (Sarbane-Oxly etc.)?
Fair question. Mr. Wu shared one reason: when a company grows to a certain stage, it’s better to have more than one boss (owner): other minority owners can contribute to the development of the company.
I think besides “better corporate governance/management”, there are at least two reasons: 1) To raise the money (capital), 2) To raise the company profile. These two reasons fit well with the recent Chinese IPOs in last Fall: New Oriental (EDU), Home Inns (HMIN), and Mindray (MR). Let’s explain one by one.
I bought some Home Inns (HMIN) again yesterday. Not surprisingly the stock dropped after I bought it, as things usually happen that way. But my time frame is from couple months to couple years, so I am not worried. The recent weakness of the stock is expected due to the new offerings and lock up expiration. Also I heard some rumors in China (two key managers left the company to join competitors recently, according to 21st century business herald). At the same time, the competition is heating up among budget hotels, as shown in this article from Pacific Epoch.
The first quarter is behind us. Just like a public company reporting quarterly results and holding conference call, I am going to do a quick review of my little portfolio. This quarter is a quite rollercoaster for me, as it did for many investors. The Jan and Feb started fairly strong and at one time I had more than 10% gain (I used google finance to track my investments). This is until Feb 27. In one day I lost all my 10% gain because of the loss of my Chinese ADRs (HMIN and MR each lost more than 10%).
Xinhua Finance Media Limited (XFML) did not turn out to be another Home Inns or New Oriental, at its IPO debut last Friday. Besides the difference of market sentiment then and now, I think the fundamental reason lies within the company and the business itself.
First Xinhua Finance is in the media and advertising business. Note media industry is still heavily regulated in China, this is different from Home Inns’ economy hotel business, which is pretty much a free market (as long as they can secure the building).
I mean the stock for the short term, not the hotel. They reported the Q4 2006 and full year results today. Here is the result. It’s good number, but again the current stock price is way ahead of curve. Going forward they are “going to beep up franchise hotels in Beijing and China”, translated in plain English: franchise hotel does not generate much revenue, the profit margin may not be as good as leased/operated hotel too. They expect a 60% to 70% top line growth for 2007, which is reasonable. But that may not satisfy the lofty expectation from the Street.
These days you need some faith to hold those relatively new Chinese IPOs. I only have Mindray (MR) at this time, but I have traded HMIN and EDU before. All three stocks dropped a lot from it highs in a week. I just want to summerize my observation after spending 2 days in Shanghai, this is in no ways a comprehensive study.
Home Inns: it faces more competition. I went to Jinjiang Inn on Sunday with a friend, we need to book a room for another friend. It’s fairly easy. Maybe this is not a busy season. But I remember one or two years ago it’s not easy to book a room one day in advance. Also Marriot (the American hotel giant) bought a Chinese economy hotel chain “Xingyu Star” and renamed it as “Wan Jia Wan Hao”. It plans to open 300 hotels in a few years.