Minor International
Record core Q1 2012 profit, but quarter-to-quarter weakness ahead HOLD (maintained) Target Price: Bt14.50 Price (11/05/12): Bt14.30
Minor International Plc (MINT)
Above: MINT posted a record core profit of Bt1.3bn for 1Q12, growth of 55% YoY and 80% QoQ. The result was 13% above our estimate and 26% ahead of the consensus, due to greater-than-expected hotel revenue. 1Q12 net profit jumped 172% QoQ, due to Bt238m in asset and inventory write-offs related to flooding damage in 4Q11.
Results highlights: The impressive YoY core earnings growth was driven by: 1) record hotel revenue of Bt3.2bn, up by 106% YoY with the consolidation of Oaks (none in 1Q11), 2) strong hotel volume (high season; a 73% occupancy rate versus 60% in 1Q11) and 3) a robust food operation—TSSG of 16.2% and SSSG of 7.6%. The Hotel and Food business numbers were more than sufficient to offset the effect of a 13% YoY plunge in retail revenue and 2% YoY slippage in residential income. GM was flat YoY at 57%. The SG&A/sales ratio declined with top-line expansion.
Residential income rose 13% QoQ, driven by timeshare revenue and a unit sale at The Estate Samui (but St.Regis condo revenue declined in 1Q12).
Outlook: We expect strong YoY earnings growth in 2Q12 (Oaks started contributing profits in June 2011), but a QoQ decline, due to tourism low season. Residential income will jump YoY, led by St.Regis condo sales (Bt487m in 2Q11) and timeshare revenue. St.Regis condo is now 67% booked (contracts signed for 61% of the units and deposits paid for 6%).
What’s changed? We have upgraded our core profit forecasts by 3% for both FY12 and FY13 to reflect stronger than expected 1Q12 results.
Recommendation: Our YE12 target price rises to Bt14.50 (from Bt13.80), due to our earnings forecast upgrade (a 20% discount to our DCF model—13.5% WACC and a 2% terminal growth rate). The 1Q12 profit represents 44% of our FY12 forecast and will almost certainly prove to be the best quarter of the year in core earnings terms. Low season for tourism runs 2Q-3Q12.
MINT isn’t particularly cheap at the moment—an FY12 PER of 18x. We maintain our HOLD rating. A new acquisition or residential project might prompt a recommendation change.
