Minor International

Minor International Plc (MINT)

MINT’s robust hotel business is providing a cushion for its weaker F&B operations, which have been hit by a slower economy and changes in The Pizza’s focus in 2Q13. MINT remains confident that its F&B arm will be able to meet its full-year targets. MINT remains one of our top picks for the Thai market with an intact Outperform rating and re-rating catalysts from continued strong tourist arrivals. The current weakness in its share price offers buying opportunities, in our view. We keep our forecasts and target price at 24x CY14 P/E, 1SD above its 5-year historical average.
 
What Happened
In a recent meeting with management, MINT mentioned that SSSG for its F&B business was only 1-2% in 2Q13, as a result of a slowing economy and The Pizza’s change of focus to à la carte items from combo sets in the past. Excluding The Pizza, SSSG was about 4%, in line with 1Q13 levels. MINT expects its SSSG to recover in 2H13 and maintains its full-year target of 4%. Meanwhile, strong tourist arrivals have been boosting its hotel business, which would not only cushion its softer F&B operations but possibly provide upside surprises.  
 
What We Think
We model in a THB540m core net profit for 2Q13, up 49% yoy but down 62% qoq from hotel seasonality. If our forecast materialises, 1H13 core net profit would form about 45% of our full-year forecast, which is not unusual as 2H is normally stronger than 1H.  
 
What You Should Do
We believe any 2Q13 weakness could present buying opportunities as MINT continues to have a well-diversified business. Strong hotel operations and its mixed-use business should continue to spur strong growth in the next few years while valuations at 18x CY14 P/E are just in line with its 5-year historical average.