Minor International

Minor International Plc

In line with expectation
MINT posted an all-time high core profit of Bt1.4bn for 1Q13, growth of 14% YoY and 17% QoQ. The result was in line with our estimate and the consensus. Net earnings were Bt1.3bn, up by 10% YoY and 2% QoQ—the firm posted a Bt265m FX loss in 1Q13 (a Bt48m FX loss in 1Q12) and a Bt122m marked-to-market gain on readily saleable investments.
Results highlights
Core earnings were driven by 6% YoY growth in the top-line to a record of Bt8.8bn and a 1.1% fatter NM to 16.1%. On a QoQ basis, MINT reported revenue expansion of 4% and 1.8% GM expansion. Average GM in 1Q13 improved from 56.8% in 1Q12 to 58.7% in 1Q13, led by the GMs for the Food business, retail space and residential sales. During the quarter, MINT realized Bt295m in other income—it had earlier overestimated the cost of building the St.Regis condo. 
Hotel revenue posted a record of Bt3.4bn, up by 5% YoY and 8% QoQ. The 8% QoQ increase mitigated the effect of a 1% YoY dip in RevPar (a 7% YoY fall in Oaks RevPar, due to baht appreciation against the Australian dollar). Thai hotel RevPar jumped 22% YoY. Food receipts increased by 12% YoY and 19% QoQ to a record of Bt2.9bn—TSSG of 14.6% YoY and SSSG of 4.1% YoY. 
Residential sales plunged by 40% YoY and 45% QoQ to Bt535m, due to lower St.Regis condo revenue (one unit of The Estate Samui sold in 1Q12 but none sold in 1Q13). Timeshare income almost doubled YoY.
MINT posted its strongest balance sheet since end-March 2009. The net gearing ratio dipped from 1.1x at YE12 to 0.8x at end-March, due to conversion of the MINT-W4 warrant (which will expire on May 18) to shares. 
Outlook
2Q13 core profit is forecast to increase YoY (but fall QoQ on low season for tourism). We expect it to be the weakest operational quarter of the year, but the strongest low season core earnings in MINT’s history.
What’s changed? 
1Q13 high-season core profit accounts for 35% of our full-year forecast (36% of the consensus), which we maintain unchanged.
Recommendation
MINT’s share price should perform in line with the market during 2Q13 low season. The stock will start to outperform the SET in late June onward in anticipation of seasonally stronger earnings. Our BUY rating stands with a YE13 target price of Bt29 (a 10% discount to DCF value). MINT trades at an FY3 PER of 23.8x, far below the 29x peak it set in 2007.