Minor International

Minor International Plc (MINT)

MINT continues down its aggressive growth path, funded by internal cash flow from its well-diversified consumer and leisure business portfolio. Overseas expansion also helps spread out business risk. We believe the market underappreciates MINT’s earnings potential; this is a good buying opportunity. We maintain our forecasts and Outperform call with an unchanged target price, still based on 16x CY13 P/E, 1SD below its five-year historical average. We believe that strong sequential earnings growth will catalyse its share price. 

More hotels under management contracts

MINT plans to add more than 800 hotel rooms this year (+8%) and 1,300 rooms next year (+13). Most will be under management contracts to help reduce the capex burden over the next couple of years. It also plans to add more hotels outside Thailand to lower market risk. At the end of 2Q12, MINT had 9,838 hotel rooms with one-third in Thailand and the remaining two-thirds overseas.

To add about 330 F&B outlets per annum

MINT plans to open about 330 F&B outlets per annum over the next five years via franchisees and in overseas markets. At the end of 2Q12, MINT had 1,274 food outlets with two-thirds in Thailand and the remaining one-third overseas. With strong cash flow from the F&B business plus the exercise of its MINT-W4 warrant, we do not think that MINT will need to raise capital to fund its expansion plans.

Reiterate Outperform

We continue to like MINT for its well-diversified business model and solid earnings outlook. We view the current weakness in the share price as a good buying opportunity since we are more bullish on its earning outlook than the consensus. As such, we reiterate our Outperform call with an unchanged target price of THB18.90, based on 16x CY13 P/E,which is still conservative at one standard deviation below its five-year historical average. Well-diversified business model and solid earnings outlook. We view the current weakness in the share price as a good buying opportunity since we are more bullish on its earning outlook than the consensus.