Minor International

Minor International Plc (MINT)

3Q13 net profit is B707m, growing 31%yoy, close to expectation
- 3Q13 net profit was B707m, growing by 31%, close to expectation. 3Q13
normalized income was B8,471m, rising by 13.6%yoy. Income from hotel, spa
and hotel management business (35% of total income) grew by 3.5%yoy, as
own-equity hotels’ occupancy rate rose from 64% in 3Q12 to 66%, and
REVPAR increased by 4.9%, compensating for maintenance shutdown of two
hotels (Anantara Samui and Maldives) and 8%yoy decrease in Oaks' REVPAR
caused by THB appreciation versus AUD at the rate of 11%. For property
business (12.2% of total income), B1,031m income was recognized: B550m
income from transferring of 7% area of St Regis condominium and the rest
from Timeshare project, of which the sales doubled from 2012. Income from
food business (41% of total income) grew by 19.5%yoy due to expansion of
new 160 branches since 3Q12 (45 new branches since 2Q13), making 1,464
total branches, as well as income from franchise and consolidated earnings
from the acquisition of Riverside, China since late-2012. Gross margin
increased to 56.6%, effective tax rate dropped to 12%, and end-3Q13 net
gearing stayed flat at 0.78x.
- Maintain forecast. Good growth in 4Q13 from every businesses
4Q13 profit is likely to grow outstandingly. Though hotel business would be
pressed by political rallies, there has been no violence. Moreover, MINT's
hotels are far from the locations where rallies take place, so there would be no
significant effect on hotel business. 4Q13 occupancy rate is likely to stand
above 70% due to high season. Moreover, an own-equity hotel, Anantara
Phuket, will be opened, and two hotels under maintenance will be reopened
within 4Q13. For property business, B400-500m income from transferring St.
Regis Condominium (6% to be transferred) would be recognized, as well as
income from Timeshare project according to increasing room number. For food
business, late-year spending season and sales promotion would boost same
store sales. Moreover, MINT has been expanding new branches, likely to boost
overall revenue growth by at least 10%yoy. We maintain FY2013 net profit
forecast at B4bn, growing 18%yoy.
- “BUY”. FY2014 fair value is B34
We derive FY2014 fair value (DCF, 9.4% WACC) at B34, implying 32% upside.
We reiterate "BUY". As MINT is among the stocks in hotel sector with the best
revenue distribution both local and international, MINT is likely to be affected
least in case that the political situation escalates to the point of violence.