Minor International

Bualuang Securities 
Investment thesis
Last week, we accompanied MINT management on a non-deal roadshow to Hong Kong. In general, the feedback from the investors was positive over the outlook for Thai tourism and we sensed that they were increasing exposure to tourism-related stocks. MINT is the best play on the developed market demand recovery theme, due to its luxury hotel focus. Our BUY call stands!
Hotel performances beat the company’s targets
MINT’s RevPar growth for proprietary hotels was 17% YoY in 8M13, which beat its target range of 12-14%.  In 8M13, the mean occupancy rate was a historical high of 71%, suggesting scope for an ADR increase particularly during 4Q13 high season.  Mr Chaiyapat said that the luxury hotel oversupply in Bangkok is easing, as the launch of new supply in 2013-14 is decelerating. MINT’s hotel room portfolio is envisaged to expand by a further 22% in FY13, 11% in FY14 and 18% in FY15.
In 2H13, the firm will achieve system-wide YoY Hotel RevPar growth (a turnaround from a 4% YoY dip in 1H13), due to the absence of an FX translation loss from Oaks in 2H13 (the baht has depreciated against the Australian dollar in recent months). Hotel earnings in 4Q13 are expected to be the best of the year—the Anantara Bophut Samui and the Veli Maldives hotels will resume full operations after 2Q-3Q13 renovations and a new Anantara Layan, Phuket location will open in 4Q13.
Food business improvement in 2H13
MINT will achieve Food SSSG of 3% in FY13 (in line with its long-term annual growth rate target range of 3-4%). Outlet expansion progress is beating the firm’s targets (up 11% in 1H13 versus an 8-10% target range). In 2H13, YoY SSSG should exceed the 2.6% posted for 1H13, led by a recovery for The Pizza Company. Note that The Pizza Co saw a 10.3% YoY SSS contraction in 2Q13, as it didn’t run any marketing campaigns while it was restructuring its menu; it achieved MoM SSSG in July-August. The Chinese operation will break even before YE13. Food EBITDA margin is targeted at 20% by YE17 (17.8% in 1H13).
Long-term earnings growth sustainability
The five-year plan is to deliver a net profit CAGR of 15-20%. New acquisitions are a core strategy; the hurdle ROIC is 15% (16% for the Food business and 13% for the Hotel operation). MINT’s clean balance sheet will support the strategy—a net gearing ratio of only 0.8x (its lowest since 2008 and far below the internal policy ceiling of 1.3x). The firm has a Bt15-16bn acquisition budget for FY13-17. With regard to residential income, a new project is slated for revenue recognition in 2H14—Anantara Estates, Phuket (16 villas) in 1Q13. MINT targets timeshare revenue of US$80m in FY13 (almost double YoY).