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The Positive And Negative For China Lodging Group

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The Positive And Negative For China Lodging Group

Goldman Sachs maintains its Neutral rating on China Lodging Group, Ltd (ADR) (NASDAQ: HTHT) saying the RevPAR boost from Shanghai Disney should "offset potentially slower openings."

Shanghai Disney will officially open June 16. Disney sees 14+ million visitors a year; Goldman, therefore, expects Shanghai Disney to potentially add 5–10 percent RevPAR for China Lodging Group's 358 hotels in Shanghai or ~1–2 percent RevPAR increment to the entire portfolio. As of the first quarter of 2016, 12 percent of China Lodging's hotels were located in Shanghai and 23 percent in the YRD region.

"We factor in faster RevPAR growth from Disney, partly offset by a slower pace of openings, and revise 2016-18E EPS by +1 to -2 percent," analyst Justin Kwok wrote in a note.

Related Link: Disney: "Next Stop, Shanghai"

Meanwhile, Goldman said the "relatively challenging operating environment in lower-tier cities may affect some franchisees' profitability." Moreover, the company's focus on quality over quantity may lead to a slower pace of franchise additions.

"As the company already added 226 hotels in 1Q16, and has another 632 hotels in the pipeline, we see limited risk for our 2016E c.776 opening target. However, we have turned more cautious thereafter, and have lowered new openings to 662 and 562 in 2017E and 2018E, respectively," Kwok noted.

Kwok maintains his $39 price target on the stock, which closed Friday's regular trading session at $33.91 and was up 1.36 percent early Monday at $34.37.

Latest Ratings for HTHT

DateFirmActionFromTo
Mar 2020CitigroupDowngradesBuyNeutral
Feb 2020CLSADowngradesBuySell
Dec 2019CLSAUpgradesOutperformBuy

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