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01/11 16:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates several negative factors: a significant revenue decline due to hotel closures, increased expenses in the restaurant business, and a flat revenue forecast for 2025. Despite some positive aspects like adjusted net income increase and planned hotel expansions, the overall sentiment is negative due to economic uncertainties, competitive pressures, and lack of clear guidance on improving shareholder returns. The Q&A section highlights management's unclear responses and flat RevPAR expectations, reinforcing a negative outlook. Thus, the stock is likely to see a negative movement in the range of -2% to -8%.
Total Revenue RMB 304 million, a decrease of 18.2% year-over-year due to the closure of 12 leased and managed hotels and lower RevPAR.
Hotel Revenue RMB 240.2 million, a decrease of 17.1% year-over-year mainly due to the closure of 12 L&O Hotels and a year-over-year decrease in RevPAR of 9%.
Net Income Negative RMB 72.8 million, mainly due to impairment of goodwill and trademarks and provisions for loan receivables.
Adjusted Net Income RMB 77.3 million, an increase of 26.8% year-over-year, with a margin of 25.4%.
Core Net Income RMB 57.8 million, a decrease of 22.3% year-over-year, with a margin of 19%.
Adjusted EBITDA RMB 71.5 million, a decrease of 38.3% year-over-year, with a margin of 23.5%.
Cash from Operations RMB 74.2 million, up from negative RMB 13.5 million a year ago.
Hotel Operating Costs and Expenses RMB 225.7 million, a decrease of 10.5% year-over-year due to the closure of 12 L&O hotels.
Restaurant Revenue RMB 65.1 million, a decrease of 25.8% year-over-year due to the closure of L&O stores and a 16.8% decrease in ADS.
Total Costs and Expenses (Restaurant) RMB 187.4 million, an increase of 98.7% year-over-year mainly due to impairment of goodwill and trademarks.
Net Income (Restaurant) RMB 18.9 million, an increase of 44.3% year-over-year excluding impairment.
Cash from Operations (Restaurant) RMB 5.5 million, positive in the fourth quarter of 2024.
Total Cash and Cash Equivalents RMB 1839.1 million, a decrease from RMB 1883.9 million as of September 30, 2024, primarily due to dividend distribution and investment in property.
New Hotel Openings: Planned 480 new hotel openings in 2025, an increase from 405 in 2024.
Restaurant Business Transformation: Strategic transformation of the Restaurant business with a focus on franchised and managed stores, which now account for almost 90% of all stores.
Market Expansion: Continued expansion into mid to upscale segments and Tier 2, Tier 3, and lower cities.
Operational Efficiency: Rightsizing of stores to improve profitability and a decrease in total operating costs by 10.5% year-over-year.
Cash from Operations: Cash from operations increased from negative RMB 13.5 million to RMB 74.2 million year-over-year.
Strategic Shift in Hotel Operations: Phased closure of leased and managed hotels in lower-tier cities, retaining only flagship properties.
Hotel Business Risks: Closure of 12 leased and managed hotels negatively impacted performance, leading to a decrease in revenue and RevPAR.
Restaurant Business Risks: Significant impairment of goodwill and trademarks, along with increased costs due to store closures, affected profitability.
Market Competition: Increased competitive pressures in the mid to upscale hotel segment may impact market share and pricing strategies.
Economic Factors: Ongoing economic uncertainties and changing consumer behavior could affect occupancy rates and overall revenue.
Regulatory Issues: Potential regulatory changes in the hospitality and restaurant sectors may pose compliance challenges and impact operations.
Supply Chain Challenges: Disruptions in supply chains could affect the availability of goods and services necessary for hotel and restaurant operations.
Hotel Openings: Planned 480 new hotel openings in 2025, an increase from 405 in 2024.
Portfolio Rejuvenation: Completion of portfolio rejuvenation by summer of 2026.
Restaurant Business Transformation: Franchised and Managed stores accounted for almost 90% of all stores, up from 78% a year ago.
Store Rightsizing: Rightsizing many stores to improve overall profitability.
Focus on Franchised and Managed Stores: Plans to grow the number of Franchised and Managed stores in 2025.
Revenue Expectations: Expect total revenues of Organic Hotel business for 2025 to be flat compared to 2024.
Hotel Closures: Expect to close about 200 hotels for a net addition of 280 hotels.
Future Growth: Focus on expanding mid to upscale segment and retaining flagship properties in key cities.
Dividend Distribution: The company had a decrease in total cash and cash equivalents primarily due to dividend distribution to shareholders.
Shareholder Return Plan: No specific share buyback program was mentioned during the call.
The earnings call indicates several negative factors: a significant revenue decline due to hotel closures, increased expenses in the restaurant business, and a flat revenue forecast for 2025. Despite some positive aspects like adjusted net income increase and planned hotel expansions, the overall sentiment is negative due to economic uncertainties, competitive pressures, and lack of clear guidance on improving shareholder returns. The Q&A section highlights management's unclear responses and flat RevPAR expectations, reinforcing a negative outlook. Thus, the stock is likely to see a negative movement in the range of -2% to -8%.
The earnings call reveals a challenging financial performance with significant revenue and net income declines, alongside a cautious outlook. The Q&A section highlights industry pressures, uncertain RevPAR trends, and vague management responses, particularly regarding dividends and liquidity. Despite some optimism in future quarters, the flat hotel revenue guidance and lack of a share buyback program further dampen sentiment. The strategic review's impact and supply chain issues add to the negative outlook, suggesting a potential stock price decline in the short term.
The earnings call revealed significant financial challenges, including a 20.5% revenue decline and reduced RevPAR. Despite a cash dividend, the lack of a share buyback program and flat future guidance are concerning. The Q&A highlighted continued RevPAR declines and management's vague responses on liquidity improvement, indicating uncertainty. The withdrawal of restaurant guidance and economic pressures further contribute to a negative outlook. While the company plans to open new restaurants and maintain dividends, these positives are overshadowed by declining revenues and competitive pressures, suggesting a negative stock reaction.
The earnings call presents mixed signals: strong growth in adjusted EBITDA and membership, but declines in RevPAR and restaurant ADS. The strategic expansion into Tier 3 cities and focus on profitability are positives, yet challenges in F&M hotels and unclear guidance on dividends and RevPAR dampen sentiment. The Q&A reveals management's vague responses and lack of specific guidance, adding uncertainty. Despite optimistic revenue growth projections, the lack of clarity and RevPAR declines balance out positives, resulting in a neutral sentiment prediction.
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