INSIDER-Home Inns unfairly hurt by China accounting fears

NEW YORK, June 16 Thu Jun 16, 2011 4:08pm EDT

NEW YORK, June 16 (Reuters) - Home Inns & Hotel Management Inc's (HMIN.O) share sell-off with other U.S.-listed China stocks over concerns about accounting practices is unwarranted given its higher earnings quality compared with its peers.

Home Inns is down nearly 30 percent from last year's highs, partly on broad fears about accurate accounting at many small Chinese companies.

But an analysis of Thomson Reuters data shows Home Inns is in the top 15 percent of the 272 U.S.-listed China companies, according to Reuters Insider quantitative analyst Mike Tarsala.

The analysis is based on StarMine's earnings quality score, which takes into account accruals changes, cash flows and operating efficiency.

It is among just a handful of Chinese companies with high overall quality scores that has no recent CFO changes, no material weaknesses reported with its accounting controls and that employs a mainstream auditing firm, Tarsala notes.

Another higher-quality China name based on its balance sheet is video game maker Perfect World Co Ltd (PWRD.O), a company with high StarMine earnings quality scores that also trades at a price-to-earnings discount versus peers.

To watch the analysis in full, click on reut.rs/mlhFgQ (Reporting by Mike Tarsala; editing by Andre Grenon)

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