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There are lots of praises for Home Inns (Rujia, most in Chinese). I saw this one in English. Actually from my own experience at four Home Inns in Shanghai I have both praises and complaints. So every coin has two sides.
On serious side, I noticed after Home Inns developed the new hotels in Nanjing and Qingdao this year, they are developing very fast in Xi’an and Anhui. This is all good. But I still have couple questions for them: as they add more hotels, how many are company owned (how many are franchised)? From my understanding they make a lot more money from company owned hotels. Also, how about pricing power? (do they need to discount to get people to stay?)
Note the stock hit all time high yesterday ($41.85).
Home Inns’ (HMIN) stock traded above $40 for the first time today Jan 3, 2007. Since its debut on Oct 26, 2006, the stock almost doubled from its first day close price (about $22.50). From traditional valuation point of view, this is a bit insane. As a stock holder I am also nervous about such a fast run. So…why don’t we do a little PE price earning ratio analysis on this one. Let’s assume it closes at $40 today. The company earned $0.12 in the first half of year 2006, 0.10 in 3rd quarter (non GAPP, exclude one time share based compensation), and let’s say it will make $0.12 for the 4th quarter, which is quite reasonable. 40 divided by (0.12+0.10+0.12), and it’s equal to 117. This is high compared to Google, or Apple. But note the company is growing at more than 100% year over year and we can expect that trend to continue for a few years.
Note: as rule of thumb (or finger), the PE ratio should not exceed the growth rate too much. Say, for a PE 15 company, we expect it grow 15% year over year.
# of ADRs 32,283,906/2
Price (27Dec06) $35
Market Cap (USD) $1,129,936,710/2 Note Google Finance has incorrect number
Rev (RMB) Q1 Q2 Q3 Q4
2005 109,405,488 (1st half) 77,733,825 98,722,199
2006 110,671,567 138,386,977 160,352,229 170,000,000
YoY 106% 72%
Est 2006 Rev: $73,343,136 (assume 1 USD = 7.9 CNY )
Market Cap/Sales: 7.5 (it’s not totally out of whack 🙂
Note: # of ADRs is outstanding shares expressed in ADR , note one ADR = two ordinary shares