Minor International

Minor International Plc (MINT)

Investment thesis
Last week, we accompanied Mr Chaiyapat Paitoon, VP of Strategic Planning, and Mrs.Jutatip Adulbhan, Investor Relations director, on a non-deal roadshow to Hong Kong. We sensed that investors under-own the stock and are considering taking new positions. The key messages from the NDR reaffirmed our view that MINT is the most resilient to the prevailing political unrest of our Tourism coverage. Our BUY rating stands with a YE14 target price of Bt29. A new residential project could mean upside to our 4Q14 profit projection.
Management said Bangkok hotel performances were weakest in Feb 2014 and started recovering in March. Food SSS resumed YoY growth in April after slipping YoY in 1Q14. MINT reaffirmed its aim of delivering a net profit CAGR of 15-20%, FY14-18. Earnings risk is mitigated by diversification—overseas income will rise from 29% of the top-line in FY13 to 45% in FY18. The key takeaways are as follow:
Strong hotel performances—positive surprise at higher room rate
The investors we met were positively surprised by MINT’s YTD performance, given the political chaos. Strong ex-Bangkok hotel numbers outweighed the effect of weak Bangkok hotel revenue (only 7% of MINT’s top-line). YTD proprietary hotel RevPar growth is 3% YoY, driven by a 10% greater mean room rate (occupancy slipped 4% YoY). MINT has proved YoY mean room rate expansion for every location—up by 2% for Bangkok, by 8% for provincial Thailand and by 18% for overseas locations. MINT will not cut prices during 2Q-3Q14 low season. Its FY14 hotel RevPar growth target is 11-12%.
Hotel expansion to drive earnings growth
MINT will expand its hotel portfolio through both proprietary properties and management contracts. Proprietary hotels will drive top-line growth and managed hotels will fatten margins. The firm guides that the number of hotel rooms will rise by 8% in FY14, by 12% in FY15 and by 15% in FY16. 
Branch rollout will lead expansion of Food business 
MINT is confident that it will deliver strong TSSG for FY14, driven by new outlets in provincial Thailand and overseas. It proved strong TSSG of 9.3% in 1Q14. SSS should recover from YoY slippage of 1.8% in 1Q14 to growth in April. EBITDA margin could rise by 1-2% over the next 3-5 years.
CAPEX reserved for new opportunity; no recap risk
The FY14-18 CAPEX plan commits Bt20-22bn for organic expansion and another Bt10-15bn reserve for acquisitions. There is no recap risk—the net gearing ratio at YE13 was only 0.8x.