Minor International

Minor International Plc (MINT)
 
Above: MINT posted a net profit of Bt470m for 4Q11, growth of 8% YoY but down 64% QoQ (Bt1bn marked-to-market of 31% stake in S&P Syndicate in 3Q11). The result was far above our estimate, due to greater-than-expected hotel revenue and residential income, but was in line with the consensus. Excluding Bt238m in asset and inventory write-offs related to flooding, 4Q11 core profit would be Bt708m, up by 62% YoY and 105% QoQ.     
The firm announced both a cash DPS of Bt0.15 for FY11 (below our estimate of Bt0.25-0.29)—a 1.2% yield—and a surprise stock dividend (10 existing shares for 1 dividend stock). XD on April 5; payout on April 30.
Results highlights: The moderate YoY core profit growth (achieved despite the flooding) was driven by: 1) a 177% YoY jump in hotel revenue with the consolidation of Oaks, 2) strong ex-Bangkok hotel performances, 2) robust food numbers—TSSG of 12.7% and SSSG of 6.5%—and 3) a 285% surge in residential income (St. Regis condo and timeshare sales). The strong QoQ core profit expansion was led by hotel high season and residential income.
Outlook: We expect moderate YoY and QoQ growth in 1Q12 earnings, led by: 1) hotel high season, 2) sustained solid food performances, 3) a unit sale at The Estate Samui (around US$3m in revenue) and 4) Oaks profit consolidation (none for 1Q11).
What’s changed? Our earnings projections stand unchanged. But our EPS forecasts will drop 10%, due to the stock dividend. There is some risk to our model—terrorism concerns might affect the hotel business.
Recommendation: We have downgraded our MINT rating to HOLD (from BUY), as its share price has increased 19% over the past three months—slightly outperforming the SET (up 17%). The price rally was prompted by anticipation of a strong 1Q12 earnings recovery. We think perceptions of terrorism risk limit the scope for share price upside and make a valuation re-rating unlikely. Our YE12 target price stands at Bt13.60, a 20% discount to our DCF model (13.5% WACC and a 2% terminal growth rate). A new acquisition or residential project might prompt us to revisit our rating.