Minor International

Minor International Plc (MINT)

3Q12 norm profit projected to grow 73% YoY and 20% QoQ

The net profit in 3Q12 is projected to stand at B486m, decreasing
from 3Q11 with B1,306m of profit due to extraordinary recognition
of S&P’s change of method for revenue recognition at B1,054m
while there is projected to be B50m of flood insurance in 3Q12. If
the mentioned item isn’t included, 3Q12 profit from operation is
projected at B436.4m (73% YoY and 20% QoQ growth) due to the
revenue from operation that is projected to increase by 17.4% YoY
to B7.8bn. Although the occupancy rate of the hotel business stands
at 67% (a slight decrease from 68% in 3Q12) because of the 2 new
hotels’ low occupancy rate, 7% increase of the room rate has
raised the average revenue per available room (RevPar) by 5% YoY.
For the property development business, B750m of revenue is
projected to be recognized from the transfer of St. Regis
condominium (as 8% of area is considered B420m) and B330m of
revenue is projected to be from Timeshare business. In terms of the
food business, it is projected to grow by 12.5% YoY in total from
3.3% growth of existing branches and expansion of 30 new
branches from 2Q12 (or 100 branches from 3Q12 to 1,304
branches). The company’s gross margin is projected to improve to
55% from 53% from the same period of last year while the affective
tax rate has declined to 15%. Overall, the norm gross margin in
3Q12 would stand at 5.6% compared with 3.8% in 3Q11.

Q4 2012 profit tends to grow continuously after entering high season for tourism

The profit in 4Q12 is likely to grow from every type of business
especially the hotel business that would be supported by the high
season of tourism. Accordingly, the average occupancy rate is
projected to be boosted to stand above 70% compared with 68% in
4Q11. For the property development business, over B350m of
revenue is projected to be recognized from Timeshare business
(compared with B190 in 4Q11) and at least B200m from the
additional transfer of St. Regis condominium (2% still waiting for
transfer and 1% waiting for contract signing). Meanwhile, the food
business still has grown constantly not less than 10% due to
continuous branch expansion. We maintain our FY2012 forecast, as
the profit from operation is projected at B2.96m or 43% YoY
growth.

Share price is fully valued… recommend “HOLD”

Although the share price has exceeded 2012 fair value, using 9.4%
DCF-WACC, at B16.00, we reiterate our recommendation of “HOLD”
due to 5.5% upside from 2013 fair value at B19.00, 3Q12 earnings
result that still has grown well continuously toward high season of
tourism in 4Q12 and 1Q13.