Minor International

Minor International Plc (MINT)

Aim for 15-20% profit growth a year from core business aggressive expansion
MINT has maintained the business goal for the next 5 years (2013-2017)
with the income growth of more than 10% and the profit growth of 15-20%
on average each year through aggressive business expansion. For the hotel
business, MINT would focus on opening new hotels on own equity and
managing new hotels under brands Anantara, Avani, and Oaks, with a
target to increase the number of hotels under its management from 84 in
1Q13 to more than 140 by 2017. For the residential development business,
the company has a plan to develop 32-rai land near Anantara Phuket into a
16 residential units of 3-8 bedroom pool villas (700-1,800 square meters)
worth of B4.5bn in total, which would be opened around 2H13 or early
2014. In addition, it will increase the number of rooms for Timeshare rights
from 46 units last year to at least 400 units in 2017. For the food business,
the company would open new restaurants on its own equity and franchises
overseas and acquire international food business to increase the number of
outlets from 1,406 at end-1Q13 to more than 2,700 by 2017, with total
growth target of 15% a year.
- Bright future projected in 2013; profit to increase 18%yoy
Although 1Q13’s net profit already accounted for 35% of FY2013’s profit
forecast, we still maintain our projection because MINT’s earnings are
usually highest in the 1st quarter before weakening in the 2nd and 3rd,
which are a low season. However, comparing the earnings outlook in the
rest of the year with earnings in the previous year, growth is still projected
from every core business. The hotel business will have additional income
from 2 new hotels in Vietnam that MINT has acquired since 1Q13 and 3 new
own-equity hotels and 8 new hotels under managements with total rooms
of 1,200. For the residential business, the company is waiting to book
B500m of income from St.Regis condominium (10%; 4% of which is waiting
for transfer, while 6% of which is waiting for contract signing), as we as the
Timeshare project that is believed to generate more income from the
increasing room number (from 57 units in 1Q13 to at least 100 units by
2013). The food business will also be prosperous with new outlet expansion
of 8-10% a year and full-quarter recognition of revenue from Riverside
restaurant in China after a business acquisition late last year. For overall
2013, we project the net profit at B4bn, growing 18%yoy.
- Buy. 2013’s fair value is B29.00
2013’s fair value, DCF (WACC of 9.4%), is B29/share, implying 12% upside,
while there is also positive sentiment from its recent inclusion in MSCI
Global Standard Index. Buy on weakness.