Minor International

Minor International Plc (MINT)

Q3 2012 norm profit grows 1.3x and 61% QoQ
MINT’s 3Q12 net profit is reported at B585.4m, decreasing from 3Q11 with
B1,306m of profit due to extraordinary recognition of S&P’s change of
method for revenue recognition at B1,054m. If the mentioned item isn’t
included, 3Q12 profit from operation has grown by 1.3x YoY and 61% QoQ
which is higher than our projection by B100m while other main portion comes
from profit sharing of associated company at B138m compared with B65m of
the prior year. For other elements, they’re in the boundary of our projection.
The profit from operation has risen by 12% YoY to B7,455m due to the hotel
business’ revenue (36% in proportion) that has improved by 15.4% YoY
along with the recovery of Thai tourism and the increased revenue from Oaks
Hotels & Resorts in Australia. For the property development business (10% in
proportion), it has grown by 30% YoY due to transfer of St. Regis with 7% of
area and revenue from Timeshare business. For food business (38% in
proportion), it has grown by 6.3% YoY as a result of existing restaurant that
has grown by 3.3% and openings of new restaurants by 30 branches from
2Q12 (or 100 branches from 3Q11) to 1,304 branches. In terms of gross
margin, it has ascended to 54.4% from 53% in 3Q11. According to the
effective tax rate that declines to 12%, the norm profit margin has improved
to 8%. In addition, the financial structure has net gearing decreasing from
the prior quarter to 1.21x.


4Q12 profit projected to grow continually due mainly to high season of tourism
High season for tourism in 4Q12 would be beneficial for the hotel business
(high margin) by raising the occupancy rate. Preliminary, the average
occupancy rate is projected to stand above 70% compared with 68% in 4Q11
and 67% of the prior quarter. Similarly, the revenue from Timeshare
business is likely to be urged to not lower than B350m (compared with
B190m in 4Q11). Moreover, there’s projected to be at least B200m from the
additional transfer of St. Regis condominium (2% still waiting for transfer and
1% waiting for contract signing). Combined with the food business that is
supported by the festive season and new branch expansion, 4Q12 norm profit
is projected to be not lower than B800m, growing substantially from 3Q12
and 4Q11 with B710 of norm profit. We maintain our FY2012 forecast,
projecting norm profit at B2.96bn or 43% YoY growth.


“HOLD”… 2013 fair value at B19.00
2013 fair value, using 9.4% DCF-WACC, stands at B19.00. Although this is
close to the current share price, the positive sentiment from profit tends to
improve constantly during high season in 4Q12 and 1Q13. Accordingly, we
reiterate our recommendation of “HOLD” for MINT.