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What: Shares of Home Inns & Hotel Management (UNKNOWN:HMIN.DL) were looking inviting today, gaining as much as 12% following a strong second-quarter earnings report.
So what: Though the report was released Monday night, the stock gained through Tuesday and continued its upward march today. The Chinese hotel operator turned in a 10.5% revenue increase to $261 million, beating expectations of $248 million, while adjusted net income improved 28.8% to $22.8 million, or $2.89 per share. That topped estimates of $2.70 per share. Home Inns opened 100 hotels in the quarter, lifting its total to 1,953, and has more than 200 under construction, saying the pipeline remains strong.
Now what: In addition to the ambitious expansion plan, management noted successful cost-control and productivity initiatives. CEO David Sun also said that the long-term outlook for the industry remains strong, but he doesn't see "catalysts for dramatic improvements in macroeconomic conditions in the near term." Still, with its expansion plan, I expect profits to grow, and the stock looks like a steal trading for a forward P/E of 3 as investors often treat Chinese stocks skeptically. I'd expect shares to move higher.
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