Minor International

Minor International Plc (MINT)
In line with expectations
MINT posted a core profit of Bt707m for 3Q13, up by 31% YoY and 65% QoQ. The result was in line with our estimate but 7% above the consensus. The 3Q13 profit was the firm’s best yet for a low season quarter.
Results highlights
The YoY core earnings growth was driven by all key businesses—Hotel, Food and Residential. The top-line increased 14% YoY to Bt8.4bn, while NM fattened 1.1% YoY to 8.5% in 3Q13. Despite the fact that the quarter was low season, the impressive QoQ core profit growth was driven by 8% revenue expansion and a core margin increase from 5.5% in 2Q13 to 8.5%. The end-Sept net gearing ratio was stable at 0.78x.
Despite the economic slowdown, MINT delivered YoY Food TSSG of 13.2% (SSS was flattish) for 3Q13. The firm reported solid Food GM of 67.4%, up 40 bps YoY.
Hotel revenue rose by 3% YoY and 8% QoQ to Bt2.8bn. Mean RevPar was flat YoY, due to a lower room rate (the Oaks room rate dipped—the baht appreciated against the Australian dollar); occupancy inched up 2% YoY to 69%. But proprietary hotel RevPar increased 10% YoY.
Residential sales were strong at Bt1bn in 3Q13 (60% from timeshare sales and 40% from St.Regis), up by 45% YoY and 51% QoQ, driven by timeshare revenue.  Residential GM was high as 72% in 3Q13.
Outlook
We anticipate a record core profit in 4Q13, driven by seasonality. MINT had a high mean occupancy rate of 73% in October (71% Oct 2012). The mean room rate rose 4% YoY in Oct after Veli Maldives resumed operating (it had been closed for renovation). The Anantara Samui (closed for renovation in 2Q-3Q13) will open in 4Q13 too. MINT will see another strong profit in 1Q14 (the first-quarter is normally the best period of the year).
What’s changed? 
9M13 core earnings represent 62% of our full-year forecast (63% of the consensus), which we maintain unchanged. The launch of a new residential project (Anantara Estates, Phuket; expected to debut in 1Q14) would mean scope for long-term earnings upside. The project value is preliminarily estimated at Bt2.5-3bn.
Recommendation
In the prevailing climate of political uncertainty, MINT is the best Tourism play, as it has the most diverse revenue streams (Bangkok hotels comprise less than 10% of total hotel revenue). Our BUY rating stands with a YE14 target price of Bt32 (a 15% discount to DCF value). MINT trades at an FY14 PER of 21.7x, only 0.6x SD above its FY06-12 mean (CENTEL trades at 1SD above its mean).