Minor International

Minor International Plc (MINT)

Investment thesis: The key messages from the analyst meeting were in line with our earnings growth forecast (core EPS growth of 21% for FY12). But the unattractive 2Q-3Q12 earnings outlook and European economic concerns (feeder market of 32% of MINT’s hotel revenue) presents a short-term headwind to the share price. Thus, we suggest a tactical entry price range of Bt12.30-12.70, pegged to a PBV range of 2.50-2.58x (the level that MINT traded at during June 2011—low season). Our HOLD rating stands with a YE12 target price of Bt14.50, a 20% discount to DCF value (13.5% WACC and a 2% terminal growth rate).
Resilient food business: The FY12 Food performance (about 30% of full-year profit) will beat its historical organic trend, driven by strong domestic consumption. Management guides for YoY SSSG of 12-13% in Jan-May—far above the normal organic SSSG range of 4-5%. Coupled with 8-10% outlet expansion per year, FY12 TSSG may beat MINT’s target range of 12-15% (13% TSSG in our model).
Jan-May boost from Oaks: The Oaks consolidation (about 10% of 1Q12 profit) boosts the bottom-line YoY through 5M12 (MINT bought the firm in June 2011). YoY Hotel profit growth will resume impressively in 4Q12, due to the low base set by 4Q11 (dampened by flooding). The double-digit YoY RevPar growth for 4M12 was driven by the occupancy rate. Thai hotel prices remain under pressure.
Timeshare will contribute significantly in FY13: MINT aims to triple timeshare revenue (Anantara Vacation Club) to about Bt1.5bn this year. However, timeshare will contribute only a small profit in FY12; the business only started in late FY10 and posted a net loss for FY11. The profit contribution will be much more significant in FY13 onward.
Residential sales peaked in 1Q12? The sale of a unit at The Estate Samui in 1Q12 (US$3m) pushed up residential revenue to about Bt650m in 1Q12. We estimate St.Regis condo receipts of Bt550-600m per quarter until the project is fully sold in 1Q13 (43% of total project value is currently available for sale). The only obvious scope for upside to our forecast is an additional unit sale at The Estate Samui (MINT expects 1-2 unit sales per year) and/or the possible launch of new projects (revenue contributions in FY14 onward).