| Stock (Symbol) | Stock Price | |||||||||||||||||||||||||||||
China Lodging Group (HTHT) |
$24 |
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| Data is as of | Expected to Report | Sector | ||||||||||||||||||||||||||||
September 21, 2010 |
Nov 8 |
Leisure |
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| Company Description | ||||||||||||||||||||||||||||||
| China Lodging Group, Limited (China Lodging) operates an economy hotel chain in China. The Company conducts all of its operations in China through its wholly owned subsidiaries in China. As of December 31, 2009, the Company had 173 leased-and-operated hotels, and 63 franchised-and-managed hotels. In addition, it had 21 leased-and-operated hotels and 123 franchised-and-managed hotels under development as of December 31, 2009. | ||||||||||||||||||||||||||||||
| Sharek’s Take | ||||||||||||||||||||||||||||||
 Yesterday China Lodging broke out past $26, and today I will purchase the stock in the Growth Portfolio. China Lodging is an economy hotel network that opened its first hotel in 2005 and had 324 at the end of last quarter. The company only had 236 at the beginning of the year. There’s 159 hotels inder development (as of June 30th). Obviously this is one of the hottest growth stories available to individual investors. Check out this fact sheet.China’s hotel and travel market is in its infancy with vast growth opportunity ahead for the next decade.I feel as though we are purchasing a small tree from a garden center — an oak tree — one that will be placed in moist fertile soil and has the opportunity to grow into a towering tree big enough to build a tree house in. In the short run we should be cautious as the Shanghai World Expo has pushed occupancy rates to the high 90% range and room rates are also higher than normal right now. The Expo runs from May 1 to October 31, and 24% of HTHT’s hotel rooms are in Shanghai, so business could slow when the party ends. |
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| One-Year Chart | ||||||||||||||||||||||||||||||
| The data and tables used in this article are from September 21 and this article is being written on October 14. HTHT was $24 on 9/21 and is $26 now. Growth looks great but HTHT’s P/E in the 40s makes the stock fairly risky to purchase here. Analysts currently have HTHT’s estimated five year growth rate at 33%. |  |
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| Profit Growth | Earnings Table | |||||||||||||||||||||||||||||
| Revenue grew 39% last quarter as profits jumped 171%. I’ve tracked HTHT for months and when it reported last quarter on July 29 I had them making 5 cents, not 19. Thomson used 19 cents, ignoringsome abnormal charges. Had I gone with the 19 cents I probably would have bought HTHT on July 30 when it broke out at $18. |  |
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| Beat the Street | ||||||||||||||||||||||||||||||
| HTHT is a new issue with only one quarter of beat the street info. Last quarter it beat by 10 cents but had we used the 5 cent profit HTHT would have missed by 5 cents (see why I didn’t buy the stock on July 30th?) | ||||||||||||||||||||||||||||||
| Annual Profit Estimates | ||||||||||||||||||||||||||||||
| 2010 estimates jumped big time, with 2011 and 2012 staying consistent. | ||||||||||||||||||||||||||||||
| Future Quarters | ||||||||||||||||||||||||||||||
| We only have estimates for the next two quarters (new issue/under the radar) and triple-digit growth is forecasted. | ||||||||||||||||||||||||||||||
| Fair Value | ||||||||||||||||||||||||||||||
| I’m really reluctant to give HTHT a P/E over 45. I don’t trust the accounting standards in China, and have been burned with Chinese small caps that didn’t make what they said they made. |
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| Ten-Year Chart | ||||||||||||||||||||||||||||||
| There’s not much history with HTHT’s ten-year chart. |  |
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| Power Ranking | Bottom Line | |||||||||||||||||||||||||||||
Growth Portfolio
11 of 18 |
Let’s be realistic. HTHT is selling for around its fair value and estimates show the company could make $0.52 this year and $0.58 next year — only 12% profit growth. Yes, growth opportunity is exceptional in the long-term but this stock is selling at around fair value — and could be a year from now.I’m really buying this stock because I wish to accumulate stocks in the China leisure industry and we could be getting acorns that someday grow into trees. HTHT will be the 11th best stock in the 18 stock Growth Portfolio Power Rankings. This stock will not be purchased for the Aggressive Growth Portfolio because there’s not much upside to fair value. As a side note I really like Home Inns (HMIN)and might buy HMIN for bothportfolios later this month. | |||||||||||||||||||||||||||||
Aggressive Growth Portfolio
N/A |
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