Company: GreenTree Hospitality Group Ltd.
Symbol: GHG
Description: They are the leading pure play franchised hotel operator in China as franchised-and-managed hotels represent almost all of the hotels in their hotel network.
Trade Date: 3/27
Shares: 19.4 million
Price Range: $16.00-$18.00
Underwriter(s): Morgan Stanley, BofA Merrill Lynch, UBS Investment Bank
Terms Added: 3-15-18
Business: In 2016, they were the fourth largest economy to mid-scale hotel group in China in terms of number of hotel rooms according to China Hospitality Association. As of December 31, 2017, they had the highest proportion of franchised-and-managed hotels among the top four economy to mid-scale hotel networks in China, with 98.9% of hotels in our network as of those dates being franchised-and-managed hotels. As of December 31, 2017, their hotel network comprised 2,289 hotels with 190,807 rooms in China, covering all four centrally-administrated municipalities and 263 cities throughout all 27 provinces and autonomous regions in China, as well as an additional 306 hotels with 23,157 rooms that were contracted for or under development. Out of those 306 hotels, 129 hotels were contracted for, and the remaining 177 hotels were under development and are expected to commence operation by June 2018.
Financials: They have adjusted EBITDA of RMB323.1 million, RMB338.5 million and RMB440.8 million (US$67.8 million), Adjusted EBITDA margin of 50.9%, 52.3% and 56.6%, net income of RMB235.7 million, RMB265.8 million and RMB285.1 million (US$43.8 million), net margin of 37.1%, 41.0% and 36.6% and return on equity of 34.5%, 29.5% and 32.4% for 2015, 2016 and 2017, respectively. They have also been able to grow their network substantially and generate strong cash flow consistently since inception in 2004 with minimal debt and equity financing. In 2015, 2016 and 2017, they generated net operating cash inflow of RMB357.3 million, RMB443.6 million and RMB476.7 million (US$73.3 million) and did not have any outstanding indebtedness as of December 31, 2017.
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