China Holiday Boosts ADRs

10/14/2013 11:00 am EST


Jim Jubak

Founder and Editor,

The National Day holiday, coupled with an extensive amount of growth in China's travel and tourism, helped this company's stock jump up last week, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

The New York traded ADRs of China's Home Inns and Hotels Management (HMIN) have climbed 15.5% from September 24 to the close on October 11.

Part of the reason is a October 10 recommendation from Goldman Sachs that added the ADRs to its top pick list. And part of the reason is a huge surge in domestic travel during China's recently concluded National Day holiday week. (Home Inns and Hotels Management is a member of my Jubak's Picks portfolio.)

Goldman's call is based on a belief that China's economy is picking up speed again. As the economy recovers, tourism and business travel pick-up and budget chains, of which Home Inns and Hotels is the largest in China, see occupancy rates climb. That, in turn, pushes up the all-important RevPAR (revenue per available room) numbers.

But huge growth in travel and tourism during the National Day holiday also demonstrates the potential in China's domestic travel and hospitality sector. Tourism revenue climbed 21% to 223 billion yuan ($36.4 billion) during this year's National Day holiday from the same holiday in 2012, according to the China National Tourism Administration.

You didn't need a market researcher to see the trend during the October 1 to 7 holiday. Just counting heads would do. For example, almost one million people visited Beijing's top tourist sights on October 3 alone, with 175,000 crowding into the Forbidden City.

As of October 11, I'm raising my target price on Home Inns and Hotels to $43 an ADR by March 2014, from my recent target of $37.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares of Home Inns and Hotels Management as of the end of June. For a complete list of the fund's holdings as of the end of June see the fund's portfolio here.

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