Bottom line: Recent moves by Baidu, SouFun and 7 Days reflect frustration by Chinese companies at lack of understanding by western stock buyers, but also spotlight the need for these companies to better educate investors about their stories.
Better investor education needed from Chinese companies
A trio of headlines last week highlighted the growing financial alternatives for high-growth Chinese companies that have lately felt unappreciated by global stock buyers. The news was quite varied, led by a threat from online search leader Baidu (Nasdaq: BIDU) to privatize its shares from New York, and a large new investment by 2 major private equity firms in online real estate services giant SouFun (NYSE: SFUN). Meantime, the formerly New York-listed 7 Days hotel chain was in headlines as it sold itself to Shanghai’s Jin Jiang International (HKEx: 2006; Shanghai: 600754).
Each of these stories is quite different, but all reflect a growing arsenal of tools that high-growth private Chinese companies have to boost their profiles and valuations as they become more skilled at playing in global financial markets. At a more fundamental level, each of these moves also represents a form of education for investors, which is critical to helping outsiders understand a group of companies from China’s vibrant but still largely unknown private sector. Read Full Post…
Bottom line: Jin Jiang’s pursuit of Shenzhen-based Vienna Hotel Group, combined with other recent M&A, could vault it to China’s leading hotel operator, though its sudden rapid expansion looks at least partly politically motivated.
Jin Jiang aims high with Vienna Hotel talks
Shanghai-based hotel operator Jin Jiang’s (HKEx: 2006; Shanghai: 600754) recent appetite for M&A continues to grow, with word that the company is in talks to buy a Shenzhen-based rival in a deal that would boost its hotel count by a third. A successful purchase of the privately held Vienna Hotel Group would mark the latest mega-purchase by Jin Jiang, which has suddenly emerged as China’s hot hotel company to watch.
Jin Jiang is certainly a household name in my adopted hometown of Shanghai, and this latest deal, when combined with others, would move the company into the ranks of one of China’s top 5 operators and the only one with a global presence. There’s only one problem with all of this, namely that Jin Jiang is one of the only top players that’s a state-run company. That contrasts sharply with other leading names like Homeinns (NYSE: HMIN), China Lodging (Nasdaq: HTHT) and Plateno, that are all privately owned. Read Full Post…
Bottom line: Jin Jiang’s purchase of a large Chinese hotel operator reflects its ambitions to become a leading player in China’s slowing market, though it could be undermined by its roots as a state-run company.
Jin Jiang to take control of Plateno
We’re finally seeing some big consolidation start to happen in China’s crowded hotel industry, with reports that Shanghai-based operator Jin Jiang (HKEx: 2006; Shanghai: 600754) is near a deal to buy the parent of formerly New York-listed 7 Days. The move comes just 7 months after Jin Jiang made another major purchase in Europe, and signals the company is clearly becoming a player to watch in China’s lodging space.
China’s hotel industry is undergoing some major changes right now, as the market suffers from oversupply created during a major build-up in the first decade of the 21st century. Leading player Homeinns (Nasdaq: HMIN) is in the process of privatizing after its stock languished on Wall Street due to lackluster growth prospects. China Lodging Group (Nasdaq: HTHT), operator of the Hanting chain, also made a major move late last year when it announced a major tie-up with French hotel giant Accor (Paris: AC). (previous post) Read Full Post…
Bottom line: Focus Media’s plan for a backdoor listing in China stands a better than 50 percent chance of success, potentially opening a new re-listing path for Chinese firms whose shares are undervalued in New York.
Focus Media eyes China backdoor listing
Former advertising services high-flyer Focus Media is eying a plan to become listed again, with an ambitious target of tripling its value from just 2 years ago when it privatized. If the plan really works, it could create an attractive template for a return to publicly-traded status for the group of about a dozen Chinese companies that were formerly listed in New York but privatized after their shares became undervalued. The key to the plan appears to be a decision to list back at home in China, where Focus’ name is more familiar and local investors are far less sophisticated and prone to hype and overinflating values of well-known companies. Read Full Post…
Bottom line: Accor’s new tie-up with China Lodging looks like a smart deal that will bring together complementary partners, and is likely to spark a new round of similar cross-border partnerships in the year ahead.
China Lodging moves in with Accor
A development I’ve been predicting for quite a while has finally happened in China’s lucrative but crowded hotel space, with news of a major new tie-up between global giant Accor (Paris: AC) and domestic budget operator China Lodging Group (Nasdaq: HTHT), which also calls itself Huazhu. The tie-up will essentially see China Lodging take over operation of much of Accor’s China portfolio, and could ultimately see Accor purchase the Chinese company outright. The move could also spark a round of similar tie-ups that sees other major foreign operators pair up with Chinese partners like Home Inns (Nasdaq: HMIN). Read Full Post…
The following press releases and media reports about Chinese companies were carried on June 27. To view a full article or story, click on the link next to the headline.
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ZTE (HKEx: 763) Sees Return To Profits Amid 4G Build-Out – Official (Chinese article)
Much is being written about the flurry of H7N9 bird flu cases in and around Shanghai, but few of the stories are focusing on the impact the outbreak is having on businesses. Chicken farmers and sellers are taking an obvious hit, but restaurants with a heavy presence of chicken and pork on their menus and Shanghai-based event organizers and supporting industries like hotels and airlines are also likely to suffer in this current bird flu event. Read Full Post…
Despite reporting solid profit growth, telecoms software maker AsiaInfo’s (Nasdaq: ASIA) latest quarterly earnings report was more significant for what it did NOT contain, namely any mention of an ongoing plan to sell the company. Does this mean the deal is dead? In my view, the lack of any news on what once looked like a lively bidding war could indeed mean that buyers are no longer interested in AsiaInfo, perhaps because the company’s financials weren’t as attractive as many thought they might be or because the company wanted too big a premium for its shares.
In a theme that is rapidly gaining momentum, yet another US-listed Chinese firm has announced a new privatization bid to capitalize on valuations that have been pushed to rock-bottom levels amid a broader investor confidence crisis. The newest management-led buyout offer from 7 Days Group (NYSE: SVN), the smallest of China’s 3 publicly listed budget hotel operators, follows a string of similar moves that have seen other US-listed Chinese companies, including Shanda Interactive and Focus Media (Nasdaq: FMCN), make similar moves. So perhaps the more interesting question is: who are the most likely companies to launch similar privatization bids, as investors can clearly make some quick money if they can answer this question correctly.
I don’t know if it’s coincidence, but China’s top 3 US-listed hotel operators have all released their latest quarterly results on the same day, revealing a range of issues with a broader theme that points to stability in the industry despite China’s rapidly softening economy. The results from Home Inns (Nasdaq: HMIN), China Lodging Group (Nasdaq: HTHT) and 7 Days Group (NYSE: SVN) all tell slightly different stories, as each chain faces its own different issues. Based on my quick read, China Lodging seems to look the best right now, while Home Inns struggles with its recent mega-acquisition of Motel 168 and 7 Days faces operational issues.
China’s slowing economy is taking a toll on the nation’s hotel sector, where growth has dipped solidly into the single digit percentage range in the latest preliminary results for China Lodging Group (Nasdaq: HTHT), operator of the Hanting and Starway brands. Investors were clearly unhappy about these latest results, which are likely to be reflected throughout the industry when China Lodging and its 2 main listed rivals, Home Inns (Nasdaq: HMIN) and 7 Days (NYSE: SVN), report their results in the weeks ahead.
Despite reporting solid profit growth, telecoms software maker AsiaInfo’s (Nasdaq: ASIA) latest quarterly earnings report was more significant for what it did NOT contain, namely any mention of an ongoing plan to sell the company. Does this mean the deal is dead? In my view, the lack of any news on what once looked like a lively bidding war could indeed mean that buyers are no longer interested in AsiaInfo, perhaps because the company’s financials weren’t as attractive as many thought they might be or because the company wanted too big a premium for its shares.
In a theme that is rapidly gaining momentum, yet another US-listed Chinese firm has announced a new privatization bid to capitalize on valuations that have been pushed to rock-bottom levels amid a broader investor confidence crisis. The newest management-led buyout offer from 7 Days Group (NYSE: SVN), the smallest of China’s 3 publicly listed budget hotel operators, follows a string of similar moves that have seen other US-listed Chinese companies, including Shanda Interactive and Focus Media (Nasdaq: FMCN), make similar moves. So perhaps the more interesting question is: who are the most likely companies to launch similar privatization bids, as investors can clearly make some quick money if they can answer this question correctly.
I don’t know if it’s coincidence, but China’s top 3 US-listed hotel operators have all released their latest quarterly results on the same day, revealing a range of issues with a broader theme that points to stability in the industry despite China’s rapidly softening economy. The results from Home Inns (Nasdaq: HMIN), China Lodging Group (Nasdaq: HTHT) and 7 Days Group (NYSE: SVN) all tell slightly different stories, as each chain faces its own different issues. Based on my quick read, China Lodging seems to look the best right now, while Home Inns struggles with its recent mega-acquisition of Motel 168 and 7 Days faces operational issues.
China’s slowing economy is taking a toll on the nation’s hotel sector, where growth has dipped solidly into the single digit percentage range in the latest preliminary results for China Lodging Group (Nasdaq: HTHT), operator of the Hanting and Starway brands. Investors were clearly unhappy about these latest results, which are likely to be reflected throughout the industry when China Lodging and its 2 main listed rivals, Home Inns (Nasdaq: HMIN) and 7 Days (NYSE: SVN), report their results in the weeks ahead.
