to HMIN. HMIN will probably miss its numbers again.

Currency Loss:
According to the conference call for Q2'07, HMIN management reported
$116M in USD. They will convert $20-30M of that to RMB by mid-
September.

This is found in the conf. call at around the 1hr.25min area in the
recording.
http://english.homeinns.com/phoenix.zhtm...

Since the RMB has strengthened by 1.1% in the past 4 weeks, HMIN has
basically lost $1M or 3 cents EPS due to the USD weakening against the
RMB. The Chinese gov't limits the amount HMIN can convert per month.

Other risks -
1. According to May Wu, CFO of HMIN, it costs 65k RMB per room in
construction/renovation cost for the hotel room. The inflation rate in
China is running at 6.5%. Cost is going up.
2. Gov't mandated costs - the Chinese gov't has mandated employee
benefit increases. That means HMIN needs to allocate more cash to
employee benefit reserves.
3. Wage pressures in China is going up.
4. Lease costs for the existing and new hotels are going up. In
Beijing alone, prices on lease have gone up 22% YTD. Other places show
10-20% increases also.
5. All 23 new hotels in HMIN are being opened in 2nd tier cities -
Wuhan, Xi'an, Chengdu, etc... Cost to ramp up service expertise,
occupancy rates, etc... are all subject to more risks.
6. Competition is keeping revpar down.
7. Occupany rate. In 1st tier cities, it's basically 100% occupany. In
2nd tier cities, it's around 70-75%. Currently, 23% of HMIN hotels are
in the 2nd tier cities. So overall, the occupancy rate is around 94.5%
(100*.77+75*.23). In the future, HMIN will have about 50% of its
hotels in the 2nd tier cities. That means the occupancy rate will
trend down.

good points...but aren't these (exept for 6,7) points also applicable
for all the other businesses/stocks in china and not exclusive to
hmin?

I agree that many of those areas could put pressure on revenue.  At
the same time, I think the move to second tier cities is smart. Costs
are lower there, for property and employees. Moreover, these are
largely un-tapped markets, as everyone has been too focused on the
four and five star market. Indeed, if HMIN can stick its focus to 3
star mid-range business and tourist hotels it will do well.

For anyone whose been to China, it's an all too common nightmare to
find that anything below four stars is usually rather dirty and not
efficient. Clean, efficient, modern and simple hotels, like those HMIN
is focusing on, have a strong future in China, where the middle class
is growing and people are travelling more often (especially in
cars!!!). I see HMIN becoming a chain comparable to Hampton Inns or
Holiday Inn Express.

So in view of this grim outlook, what explains the 24%+ run up over
the last month?

What explains the run-up in most Chinese stocks? Some have a good
fundamentals...many others follow, in my opinion, a more widespread
Chinese love for gambling. Anybody who has been to China will notice
this love right away, from taxi drivers on the streets gambling with
buddies in their limited offtime to families of peasants pooling their
money together for bets on the domestic exchanges. In my own two years
there I have never seen a nation more enthralled by games of chance.
Darn good thing the government keeps casino gaming confined to
Macau!!!

In the words of Hu Xingdou, an econ professor at Beijing Institute of
Technology: "Chinese are the biggest gamblers in the world. Thousands
of years under an imperial system that tries to keep people down leads
to a mentality of trying to become super-rich overnight, preferably
without the hard work." ...super rich overnight without hard work.
Sounds good to me!!!

Tell me: Why the hell would Home Inns take dollars over RMB from its
clients? If I am Chinese and I am in a Chinese hotel, I'd expect to be
charged in Chinese Yuans, NOT Dollars. Your post does not make sense.

Why the hell?  Please listen to the conference call.

HMIN did a secondary offering in May that raised $120M USD.  That
amount of US dollar is locked overseas because the lovely Chinese
Commie's sets a limit to how much USD may be repatriated back to
China.

For HMIN, that amount is about $20M every quarter.

That's how HMIN is experiencing a large currency loss here.

Nobody knowledgable is implying that HMIN is charging in USD's.

Hmmm...I'm not sure who is buying the "Chinese Stocks"  Are you
referring to the ADRs like HMIN that mainland Chinese can NOT buy?

It's only people outside of China who can access the US market that
can buy HMIN.  Maybe you are referring to those Gambling American
Chinese?

Pretty funny to hear people in the US complain about how daffy the
Chinese are when they bid their own stocks up to PEs of 50 to 100, but
take a look at this thing (HMIN) -- it's got a PE a wee bit over that
range.

Most ADRs, at least Chinese ones, follow the value of their offerings
on domestic exchanges. If stocks like CHL and PTR weren't being driven
to the moon at home, they wouldn't be going up here. Granted, it's our
own fault for following them to the moon. I guess China's gambling on
its domestic exchanges (and gambling it is) is addictive.

Yes, of course, PRC citizens cannot buy in the US (or elsewhere); BUT
within the year the doors will open for Chinese institutional
investors to invest more money abroad. That's when we'll see how much
that gambling spreads. Unlike most Americans, the Chinese have close
to $5 trillions in savings earning, generally, very little interest.
Their going to want to put it somewhere!!!