Hengdeli CFO to join Home Inns on 25 August 2014
Home Inns & Hotels Management Inc. (NASDAQ: HMN) announced on 12 August 2014 that Ms. Cathy Xiangrong Li will assume the position of chief financial officer (CFO) at Home Inns & Hotels, effective 25 August 2014.
According to the announcement, Ms. Li has worked as the CFO of Hengdeli since 2010, and was responsible for the financial planning and analysis, accounting, tax, treasury, investor relation, and IT functions. She was also actively involved in other corporate activities including strategic and business planning, supply chain optimization, and performance and incentive management. Prior to joining Hengdeli, she was the corporate finance director of Unilever Greater China Group from 2007 to 2010. In 1993, Ms. Li joined Unilever as a management trainee, and held various accounting, finance, and managerial positions in a number of divisions or subsidiaries in China, the United Kingdom, and Singapore between 1993 and 2010.
Deutsche Bank’s view
We believe Hengdeli will officially announce Ms Li’s exit along with the announcement of either a new appointment (which is a normal practice) at its upcoming 1H14 results.
We believe Ms Li’s professional experience in an international company contributed to Hengdeli’s operations, especially on the cash flow and inventory management front. We expect the company to look for a candidate with similar expertise.
To recap, we expect Hengdeli to report a 9.3% YoY decline in EBIT to RMB532m on a 4.6% YoY rise in revenue to RMB6.6bn. Core NPAT (excluding any one-off item) on our estimates will decrease 19.1% YoY to RMB301m. Hengdeli has an investment in Ming Fung (860.HK, NR), which suffered a share price drop in 1H14, and we therefore expect Hengdeli to incur a one-off investment loss of ~RMB29m (not included in our forecast currently). We expect GPM to decline by 1.4ppt YoY because of increased promotional activities. The company will announce its results on 19 August 2014. (For more information, please refer to our alert of 17 July 2014 titled Hengdeli Alert – 1H14 preview – China bottoming with HK sales trend similar to that in 2H13.)