Why Huazhu Group Ltd (NASDAQ: HTHT) stock is killing it

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Huazhu Group Ltd (NASDAQ: HTHT) stock rose over 8% on 15th March, 2019 (As of 9:32 am GMT-4; Source: Google finance) after the company posted net loss attributable to Huazhu Group Limited was RMB418.5 million (US$60.9 million) for the fourth quarter of 2018, compared with net income attributable to Huazhu Group Limited of RMB225.7 million in the fourth quarter of 2017 and RMB667.8 million in the previous quarter. The adjusted EBITDA grew by 37% with a margin of 32.5%, up 3.6 percentage points from 28.9% last year. The adjusted net income increased by 36% with a margin of 17%, up 1.7 percentage points from 15.3% last year. Net revenues for the fourth quarter of 2018 were RMB2,683.3 million (US$390.3 million), representing a 20.6% year-over-year increase and a 3.0% sequential decrease. The year-over-year increase was primarily attributable to the hotel network expansion and RevPAR growth, the sequential decrease was due to seasonality. Unrealized losses from fair value changes of equity securities for the fourth quarter of 2018 was RMB755.9 million (US$109.9 million), compared to unrealized gains from fair value changes of equity securities of RMB24.1 million in the fourth quarter of 2017 and unrealized gains from fair value changes of equity securities of RMB179.2 million in the previous quarter.

Moreover, Hotel operating costs for the fourth quarter of 2018 were RMB1,737.4 million (US$252.7 million), compared to RMB1,623.4 million in the fourth quarter of 2017 and RMB1,657.8 million in the previous quarter, which is a 7.0% year-over-year increase and a 4.8% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2018 were RMB1,728.8 million (US$251.4 million), which is 64.4% of net revenues, compared to 72.7% for the fourth quarter in 2017 and 59.7% for the previous quarter. The year-over-year decrease in the percentage was mainly attributable to the improved blended RevPAR and the increased portion of manachised-and-franchised hotels. The sequential increase in the percentage was mainly due to seasonality.

Additionally, as of December 31, 2018, the Company had a total balance of cash and cash equivalents, restricted cash of RMB4,884.3 million (US$710.4 million). As of December 31, 2018, the Company had a total loan balance of RMB9,759.3 million (US$1,419.4 million) and the unutilized credit facility available to the Company was RMB689.4 million. Operating cash inflow for the fourth quarter of 2018 was RMB574.3 million (US$83.5 million). Investing cash outflow for the fourth quarter was RMB733.2 million (US$106.6 million). Operating cash inflow for the full year of 2018 was RMB3,048.6 million (US$443.4 million), representing an increase of 24.3% from 2017. Investing cash outflow for the full year of 2018 was RMB6,345.3 million (US$922.9 million), compared to RMB6,235.4 million in 2017.

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