Posts Tagged ‘ HMIN ’

Zuoan Fashion (ZA) – Shares Jump 25%

October 10, 2011

I keep an eye on a lot of the Chinese ADRs in order to gauge market sentiment. The sector has been hammered (perhaps I need a stronger tool for my description) based on dual fears of corporate governance issues and a China hard landing.

While not invested in the space, I’ve pondered that the stocks can’t all be frauds. Listing via reverse merger transactions is certainly a major red flag but recently even the companies that went through actual IPOs and have real auditors have been demolished.

Zuoan Fashion (ZA) shares IPO’d at $7 last year and subsequently traded down to the $2s. The company operates high ROIC apparel concessions in Chinese department stores. Same store sales have been healthy and I take note today that the shares are up 25% today.

Last week, I highlighted budget hotel operator Home Inns (HMIN) when the shares sold off to $24. With the market rally they are trading at $28.50 today (+19% in seven trading days)

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Home Inns – Company Defends Shares and Street Comes to Support

September 29, 2011

Home Inns has turned into another interesting Chinese ADR saga. It appears to me that this is more to do with an extremely jittery market than anything relating to a continuation of the fraudcap dynamics that have taken down Chinese reverse mergers and Sino-Forest.

Overnight the company has secured financing of $240M termed out to September of 2016. The loan was from CSFB and JP Morgan.

A couple of Wall Street analysts, including Kevin Yin of CSFB are out defending the shares. It is being reported by Kevin that the company took calls overnight and stated there has been no change in business trends and that occupancy and RevPar are all in line with previous guidance. Home Inns is up 7% today recovering almost half of yesterday’s decline. This company is well positioned in the China hotel space as budget hotels expand quickly through China. If there is nothing sinister going on this will have been a great opportunity to purchase a premium China growth story. It shows how things may be getting overdone in terms of fears and cynicism amongst investors as well.

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Home Inns (HMIN) falls 16% on no news

September 28, 2011

Interesting – it appears that confidence has just suddenly been lost in this fast growth China ADR. The Company had a Corporate Day with Goldman Sachs on September 7th. The analyst sponsoring the event was Jason Kwok, and it was reported that management has been seeing 5% room rate hikes and saw no signs of a slowdown in volume trends. GS pointed out that in the worst quarter of the financial crisis portfolio occupancy stood at 90%, with only an 8% RevPar decline. We aren’t in an environment anywhere near that.

It’s worth noting that Home Inns actually had an IPO here in the US with CSFB as the lead. You can get the prospectus on the IR website. The stock didn’t list through a reverse merger. The auditor is Price Waterhouse Coopers

Today the implied volatility on the NASDAQ listed stock surged to 105%. Historical implied vol has been 50%. Volume was 1,863,137 shares vs average volume of 549,419 (3.4x normal).

It bears watching here if there is any news tomorrow.

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