Minor International

Minor International Plc (MINT)

In line with expectations
MINT posted a core profit of Bt426m for 2Q13, up 22% YoY but down 70% QoQ (record earnings for 1Q13). The number was in line with our estimate and the consensus.
Results highlights
The YoY core earnings growth was driven by strong Food business numbers and residential sales. 2Q13 revenue rose 8% YoY to Bt7.8bn, while GM fattened by 1.8% YoY and core margin by 0.6% YoY. The QoQ profit decline was due to seasonality, following record core earnings of Bt1.4bn for 1Q13. The top-line dropped 12% QoQ, while GM was squeezed by 2.5% QoQ and core margin by 10.7% from an all-time high of 16.1% in 1Q13. The end-June net gearing ratio was stable at 0.78x.
MINT reported hefty YoY Food TSSG of 13.9% (and SSSG of 1.1%) for 2Q13, boosted by the consolidation of the Beijing Riverside & Courtyard Restaurant chain in China.
Hotel revenue inched up 2% YoY, but fell 24% QoQ to Bt2.6bn. Mean RevPar declined 4% YoY, due to a lower room rate, while occupancy was flattish at 66%. But proprietary hotel RevPar rose 10% YoY. The QoQ earnings fall was due to tourism low season and two hotels being closed for renovations (Anantara Bophut Samui and Veli Maldives). Oaks’ RevPar slipped 7% YoY, due to baht appreciation against the Australian dollar (its occupancy rate was good at 75% in 2Q13).
Residential sales jumped by 15% YoY and 27% QoQ to Bt681m, driven by Timeshare sales—Anantara Vacation Club.
Outlook
2Q13 will prove to be the weakest quarter of the year (but the best low season in MINT’s history). We expect moderate QoQ (and YoY) earnings growth in 3Q13. The 50% stake in Per AQUUM (acquired in July) will boost management income (two hotels in the Maldives and one in the UAE). MINT will resume strong profit growth in 4Q13 high season. The Anantara Samui and Veli Maldives hotels, which closed for renovation, will re-open in 4Q13.
What’s changed? 
1H13 core profit represents 45% of our full-year forecast (46% of the consensus), which we maintain unchanged. MINT will launch Anantara Estates, Phuket, in 1Q14. The project value is preliminarily set at Bt2.5-3bn. We have yet to factor this planned venture into our model.
Recommendation
Our BUY rating stands with a YE13 target price of Bt30 (a 15% discount to DCF value). MINT trades at an FY3 PER of 24.2x, down from the peak of 29x it traded at in 2007.