Minor International

Minor International Plc (MINT)

- Aggressive expansion through asset right investment
MINT maintains its business goal for the next five years (2014-2018), aiming for
profit growth of 15-20% a year. The company has adopted a policy of asset right
investment, which is a mix of asset heavy strategy for own-equity and asset
light strategy for management and franchise business. In addition, the company
has planned to acquire businesses in Australia and Africa in order to increase
proportion of overseas profit to above 50% (from 43% in 2013). For the hotel
business, MINT would focus on expanding own-equity hotels, projecting to
increase the number of hotels under its management from 103 to 160 by 2018.
Recently, the company has prepared to open eight new own-equity hotels and
accept 28 more hotels to manage in 2014-2016. For the property business, MINT
is going to launch a B5bn-worth 16-unit residential project, Anantara Layan
Phuket, this year (not included in our forecast). For the food business, the
company would increase its total outlets from 1,544 at end-2013 to more than
2,600 outlets by 2018. Average budget for all the above-mentioned investment
plans is B4-5bn a year, plus additional B2bn a year for new businesses; funding
sources are internal cash flow and loan.
- Business diversity alleviates effect from Bangkok political unrest
The anti-government protest rallies have made an occupancy rate of hotels in
Bangkok during 1 January – 19 February fall 28%yoy and RevPar decrease
30%yoy. However, since Bangkok hotels account only for 7% of the total income
and income from provincial and overseas hotels have been strong, overall
RevPar of the hotel business still increased 13%yoy. For the food business,
although the sluggish economy has slowed down same-store-sales growth in
January to only 0.9%, total sales growth was recorded at over 10%yoy, thanks
to continuous branch expansion. Under an assumption for chronic political
turmoil, we conservatively maintain FY2014 profit forecast at B4.4bn or the
growth of 7.3%yoy.
- Downgrade to HOLD. 2013 dividend is B0.35/share
2014 fair value, DCF - WACC of 9.4%, is B26.00. As the current share price
provides only 10% upside and there is still a risk from investment sentiment due
to the political problem, we downgrade our recommendation from BUY to HOLD.
2013 dividend yield is B0.35/share. XD date is 16 April 2014 and dividend will be
paid on 30 April 2014.