J.P. Morgan raises PT on Home Inns, praises margin execution, sees continuation
J.P. Morgan raises its PT on Home Inns & Hotels (HMIN) to $46 from $40 and reiterates a Buy rating following the company's Q3 results. The firm notes that EBITDA growth outpaced revenue (19% Y/Y vs. 9%) in Q3, reaching a margin of 25.7% (+1.2% Y/Y).
The cause of stronger-than-expected margins? solid cost control, with total cost as a % of L&O revenue falling 4% on the back of personnel savings, the ramp-up of the acquired Motel 168 brand, and a shift in business mix towards higher-margin franchise revenue (22% Y/Y growth). J.P. Morgan sees margin trends continuing into 2014, with debt reduction and dividend opportunities in 2015.
J.P. Morgan lifts target on Home Inns following Q2 results
Home Inns' (HMIN +2.5%) earnings growth should come in stronger than its peer group, J.P. Morgan says, following the company's Q2 beat.
Analyst Kenneth Fong raises his price target on the shares from $36 to $40, representing a 37% upside from Monday's close.
Fong notes that the quarterly revenue beat was largely attributable to "better margin," as the company demonstrated "good cost control [and] operating leverage," and saw an "increased contribution from high margin franchise hotels."
Credit Suisse initiates coverage on Home Inns & Hotels Management (HMIN +0.2%) with an Outperform rating. The firm's price target of $38.30 reps 29% upside potential for share of the Chinese hotel chain.
Hotel hunting: China's Dalian Wanda Group is in talks with major hotel chains in the U.S. over buying and building more hotels in North America. Chairman Wang Jianlin didn't disclose which hotel companies he is in discussions with, but noted investing in areas such as Kansas or Iowa that need capital is something Chinese companies should look at.