No Rest And Relaxation For This Chinese Hotel Stock (HTHT)
Shares of China Lodging Group, Limited (NASDAQ: HTHT) are gaining today, on strong volume, and investors may want to look at this newly minted IPO.
China Lodging Group, Limited, through its subsidiaries, owns and operates a chain of hotels in the Peoples Republic of China. It operates HanTing Express Hotel that targets knowledge workers and value-conscious travelers.
The company came to public markets back in March 2010, and has been on the one strongest performing shares since its inception. It came to markets at $13.50 a share, and has steadily risen ever since then.
China Lodging is seeking to cash in on the tremendous growth in the Chinese economy, as well as the growing demand for business and leisure travel within the country.
This is definitely a growth story, as shares are priced at 42 times forward earnings. One misstep by the company could send shares down sharply.
Having said that, I still believe in this growth story, particularly when you look at its competitors like Home Inns & Hotels Management Inc. (NASDAQ: HMIN). HMIN is a little cheaper on an earnings basis, trading for 29 times forward earnings. Traders seem to be betting that HTHT can outgrow its rival and is deserving of a higher multiple.
Shares of China Lodging Group are up 3.5% today, to trade at $24.65.
