Minor International

Minor International Plc (MINT)

Investment thesis
Anticipation of record FY13 earnings, up 20% YoY, will prompt the market to re-rate MINT, we believe. New acquisitions and a residential project would mean scope for bottom-line upside. MINT will post strong profit growth, 3Q12-1Q13 (up both YoY and QoQ). The stock trades at an FY13 PER of 19.3x, near its mean.  We have revised up our YE13 target price to Bt21 from Bt17.20 to factor in our model upgrades. Our forecast is pegged to an unchanged a 20% discount to our DCF model (13.5% WACC and a 2% terminal growth rate). BUY!

Positive surprise—EU tourist arrival growth
There were concerns that EU arrivals (33% of MINT’s market in 1H12) might decline. But in 9M12, EU tourists to Thailand rose by 7.5% YoY (up 6% in Sept and 5% for 3Q12). The trend is much better than expected—the conventional wisdom held that the EU recession would lead to European visitor shrinkage. Coupled with fast-growing Chinese (up 39% YoY for 9M12) and Russian (up 19%) tourist numbers, total foreign arrivals to Thailand hit 16m in 9M12, up 9%. Thus, we think full-year arrivals will set a new record and beat the TAT’s forecast of 20m people. 

Earnings forecast upgrades
We have revised up our core profit forecasts by 5% for both FY12 and FY13, as MINT’s guidance for the 9M12 performance exceeds our earlier model assumptions. We have upgraded Food TSSG to 16% for FY12 (from 12.8%) and 14% for FY13 (from 11.2%) to factor in 16.4% TSSG for 9M12 (5.8% of which was SSSG, the remainder outlet expansion). With regard to the Hotel business, we upped our mean occupancy rate assumptions by 3% to 70% for FY12 (expect 69% for 9M12) and by 3% to 72% in FY13. We conservatively model for hotel room rate growth of 2%. Thus, we see scope for further earnings forecast upgrades following negotiations for forward contracts between agents and MINT in Oct-Nov.

The best 3Q12 low season result in the history
The firm is expected to post a 3Q12 core profit of Bt456m, up by 32% YoY and 26% QoQ. All three core business will report YoY growth: 1) Hotel RevPar up 5%, driven by a 7% room rate increase (the occupancy rate dipped 1%, due to two overseas hotels closures for renovation (KaniLanka and Naladu Maldives), 2) Food TSSG of 12.5% (3.5% SSSG) and 3) we anticipate 30% higher residential income (Bt400m from St.Regis condo and Bt300m from timeshare revenue). 

Impressive 4Q12-1Q13 high season profile
The Thai tourism high season runs from the fourth-quarter through the first-quarter of the following calendar year and typically accounts for 60-70% of full-year earnings. We expect both YoY and QoQ profit growth for both 4Q12 and 1Q13 (possibly a record core profit for 1Q13).