Minor International

Minor International Plc (MINT) 

In line with our estimate

MINT posted a record core profit of Bt1.7bn for 4Q14, up by 8% YoY and 126% QoQ. The result was in line with our estimate and the consensus. Despite Thai political unrest in 5M14, MINT also reported all-time high core earnings of Bt4bn for FY14, up 7% YoY, thanks to the diversity of its revenue streams. Surprisingly, the board announced both a stock dividend (at a ratio of 10 existing shares for one dividend share) and a Bt0.25 cash DPS (XD on April 17; payment on April 27). 

Results highlights 

The record profit was driven by YoY and QoQ growth across Food, Hotel and retail businesses. Core revenue rose by 3% YoY and 21% QoQ to a new high of Bt10bn. Core margin fattened by 0.4% YoY and 7.6% QoQ to 16.4% in 4Q14. MINT delivered strong YoY Food TSSG of 16.5% and SSSG of 0.4%. Hotel revenue rose by 12% YoY and 29% QoQ to Bt3.7bn. RevPar inched up 1% YoY; the mean occupancy rate was 70% (down 1% YoY); the mean room rate rose 3% YoY. Proprietary hotel RevPar increased by 2% YoY and managed hotel RevPar by 11% YoY, but Oaks’ RevPar slipped 5% YoY. Residential sales dived 22% YoY for 4Q14, due to lower St.Regis sales. YE14 net gearing was flat QoQ at 1.0x.

Outlook 

MINT may possibly report a new record core profit for 1Q15, driven by high season and revenue from recent acquisitions. The first-quarter is high season. Also, in 1Q14 Bangkok hotel performances set a very low base comparison (political conflict). Earnings from Sun International (eight hotels in Africa) and Tivoli hotels (two hotels in Brazil and six in Portugal) will boost the 1Q15 profit. We expect YoY Food SSSG in low single digits and TSSG in double digits for the quarter.

What’s changed? 

The properties in Brazil and Portugal that were bought in Jan 2015 aren’t yet priced into our model. The deal should add 3-4% to our FY15 profit forecast. For the time being, our FY15 record core profit forecast is Bt5.2bn, growth of 18% YoY. Proprietary hotels (40% of MINT’s hotel revenue) are expected to post a 70% occupancy rate for FY15 (60% for FY14) and the mean room rate should rise by 6-7%. Our Food target ranges are 2-3% for SSSG and 12-15% for TSSG. 

Recommendation 

The historical evidence shows that stock dividends normally push up the share price in the short-term. Over the long-term, we believe that MINT will mitigate the effect of 9% stock dilution through acquisitions and new residential projects. It trades at an FY15 PER of 26.8x, the cheapest ratio of our Tourism coverage. We have a BUY rating with a YE15 target price of Bt41.50 (a 5% discount to DCF value, 9.4% WACC and a 2% terminal growth rate).