Minor International (MINT)

Minor International Plc (MINT)

2Q12 net profit at B364m lower than projected but increases 30.2% YoY
2Q12 net profit stands at B364m or growth of 30.2% YoY but a fall of
71.5% QoQ due to impacts from low season of tourism, which is lower
than our projection by 16% mainly caused by the profit sharing from the
associated companies that is lower than projected by B21m and the tax
expense that is higher than projected. However, other matters have
turned out to be as projected, as follows. The revenue from operation
stands at B7,266m or an increase of 24.6% YoY from the hotel business
(35% in proportion) that has 70.5% YoY growth of revenue due to the
continuous recovery of Thai hotel business. Moreover, there is
recognition of at least B1bn from Oaks Hotels & Resorts in Australia for
full quarter compared with one in 2Q11 that only 1 month of revenue
was recognized. For the property development business (8% in
proportion), B593m of revenue has been recognized from Timeshare
business at around B330m while the rest belongs to transfer of St.
Regis. For food business (40.5% in proportion), it has grown in total by
12% YoY as a result from the existing restaurant that has grown by
6.5% and openings of new 105 branches from 2Q11 or 10 branches
since 1Q12 to 1,274 branches. In terms of profitability, net profit margin
with 5% increase in 1H12 has brought about net profit at B1,639 or
growth of 49% YoY. The financial structure at end-2Q12 has net
gearing at 1.25x.

Maintain forecast. 2H12 still tends to grow continuously from every business
We maintain our forecast as 2H12 earnings still tend to grow constantly
since the hotel business has grown well along with tourism industry.
According to the recent information in July 2012, the occupancy rate has
increased by 3% YoY while the room rate has increased 7% YoY,
reflecting an increase of revenue in the hotel business especially new
ones like Maldives and St. Regis that began to have better earnings after
starting full operation for the first year. Moreover, the operation in 2H12
still has a support from the property development business in which the
revenue recognition from Timeshare business that is projected at B600-
700m (compared with B330m in 2H11) and a transfer of St. Regis
condominium that is projected at B300-400m (7% still awaiting
transfer). For food business, it has grown well along with the economy
and aggressive branch expansion while there is a chance of receiving the
remaining insurance claims (before tax) at B120m, therefore the
operating profit in 2H12 is projected to grow notably from 2H11. For full
2012, profit from operation is projected at B2.96bn or growth of 43%
YoY.

Current price close to 2012 FV at B16, downgrade from “BUY” to “HOLD”
Due to the current price that is close to 2012 fair value, using DCFWACC
at 9.4%, at B16.00, we downgrade our recommendation from
“BUY” to “HOLD”.