Minor International

Minor International Plc (MINT)

- 4Q13 net profit estimated at B1,391m or 5%yoy growth
We estimate 4Q13 net profit at B1,391m or the growth of 5%yoy. Slowing hotel
business in Bangkok as a result of the political unrest since December 2013 has
been compensated by strong performance of the hotel business in other
provinces and overseas. Accordingly, overall own-equity hotels’ occupancy rate
in 4Q13 has been 71%, while RevPar has increased 10%yoy. For the property
business (11% of total income), B1,020 income is expected from a transfer of
7% of St. Regis condominium (B500m), from a Timeshare project (B400m), and
from selling of a villa at Samui (B120m). In terms of the food business, although
same-store-sales growth has been suppressed at only 0.9% due to the sluggish
domestic consumption, there has been compensation from a launch of 163 new
outlets since 4Q12 (or 80 new outlets since 3Q13) to 1,544 outlets at present.
Consequently, the overall food business (37% of total income) would still grow
by 14.3%yoy. We project 4Q13 income to increase 12%yoy to B9,208m; net
profit margin is estimated at 15%.
- Diversified business structure helps limit political risks
Even though the Bangkok shutdown and invocation of the Emergency Decree
since early 2014 have adversely affected the hotel business, evident by an
occupancy rate during 1-23 January that dropped to 50%, versus 70% of the
same period last year, and RevPar that has decreased 20%yoy, the negative
impact has been alleviated by MINT’s advantage of business diversity, both
domestically and internationally. The hotel business in Bangkok comprises only
8% of the company’s total operating income, while RevPar of provincial hotels
has risen averagely by 10%. Moreover, the company has been able to hike the
room rate at Maldives continuously. All these positive factors have helped to
limit the effect from domestic politics significantly. Overall RevPar in 1 – 23
January 2014 has still increased 11%yoy. Although the political unrest tends to
drag on, we make a forecast under a conservative method, projecting RevPar in
2014 to increase only 5%, same-store-sales to grow only 2-3%, and new outlets
to increase 8%yoy, resulting in FY2014 profit of B4.4bn or the growth of
10%yoy.
- Buy. 2014 fair value is B26.00, 25% upside implied
Of all hotel entrepreneurs, MINT is likely to get the least effect from the political
turmoil, thanks to its most diversified businesses. 2014 fair value (DCF – WACC
of 9.4%) is B26.00, implying 25% upside. Buy for long-term investment.