Minor International

Minor International Plc (MINT)

Investment thesis
We maintain our BUY rating on MINT with an unchanged YE13 target price of Bt29, a 10% discount to DCF value. In the short-term, we expect record 1Q13 earnings (to post on May 10). Excluding Oaks (Oaks’ RevPar lags the RevPar of MINT’s hotels) and management contracts, the firm’s RevPar in 1Q13 beat its 1Q08 peak by 7%. Over the long-term, new acquisitions and Anantara Residences Phuket (a residential project) would mean scope for bottom-line upside. MINT trades at an FY13 PER of 23.9x, far below the 29x it traded at in 2007 (2SDs above its mean).
Record core and net profits expected for Q1 2013
We estimate all-time high core earnings of Bt1.4bn for 1Q13, up by 21% YoY and 11% QoQ. Net profit is expected to post a rise of only 12% YoY, as in 1Q12 MINT received a Bt100m insurance payout for 4Q11 flooding. The drivers were Food business TSSG of 14.6% YoY (4.1% SSSG and 11% outlet expansion) and an impressive Thai Hotel performance for high season. Mean Hotel RevPar should post an increase of 3% YoY (occupancy rose from 73% in 1Q12 to 76% in 1Q13 and the 1% mean room rate contraction was due to an FX conversion loss for Oaks, due to a stronger baht).
For 1Q13, we expect residential revenue to report a 24% YoY dive to Bt680m from the high base set by St.Regis condo transference in 1Q12. We estimate St.Regis condo revenue at Bt200m in 1Q13, down 60% YoY. Timeshare revenue is estimated to have doubled YoY to Bt480m.
Strong 1Q13 Thai hotel growth will outweigh weaker Oaks numbers  
MINT’s Thai hotel RevPar will post a 22% YoY jump, led by a high occupancy rate of 78% (68% in 1Q12) and a 6% higher mean room rate—more than sufficient to offset the effect of weaker 1Q13 Oaks numbers. Oaks’ occupancy rate is assumed flat YoY at 78%. The Australian subsidiary’s room rate dipped only 1% in Australian dollar terms (to A$158 in 1Q13), but the baht appreciated 6% against the Australian dollar QoQ, making for a 7% decline in room rate in baht terms.
The operational turnaround in China is real
MINT’s Chinese operation will report break-even for 1Q13—its first quarter of black ink after years of losses (losses of Bt100m in FY12, Bt120m in FY11 and Bt150m in FY10). Management had earlier guided that the China wouldn’t turn around till 4Q13. The shift to black ink was led by earnings from Beijing Riverside & Courtyard (Riverside), in which MINT bought a 49% stake in 4Q12. The Chinese operation will continue to improve, we believe, as MINT plans to increase its stake in Riverside to 79% by YE14. In our model, we assume a 60% stake by YE13 and 79% by YE14 (we forecast strong TSSG of 24% in FY13 and 15% in FY14).