Minor International

Profit to grow 8%yoy in 3Q14, to peak in 4Q14 BUY

Minor International Plc

- 3Q14 profit to grow 8%yoy

3Q14 net profit is estimated to grow B764m, growing 8%yoy. Although

hotel business in Thailand has not fully recovered after the political turmoil,

overseas hotel business has been strong, possibly boosting income from

hotel business (33% of total income) by 4%yoy. As a result of strong

earnings of overseas hotels, income from hotel management (2% of total

income) is projected to grow by 50%yoy, and profit sharing from affiliates

are expected to rise by 50%yoy to B204m. 3Q14 income from food business

(44% of total income) is expected to grow by 14%yoy because same store

sales are projected to rise by 1.2% and MINT has opened 184 new

branches, making the total branches of 1,648. Income from property

business (8% of total income) is projected to drop 37%yoy to B650m as

only two units of St. Regis condominium have been available for sales.

Overall, normalized income is estimated at B8.7bn, rising 3%yoy. EBITDA

margin is projected to rise from 18.4% in 3Q13 to 19% in 3Q14.

- 4Q14 profit to make year's peak

4Q14 profit is projected to make the year's peak from every business. Hotel

business would rebound because the political situation has become more

stable and the business has entered high season; occupancy rate stood at

70% (versus 66% average occupancy rate in 3Q14) and REVPAR rose by

9%yoy on October 1-25. At least B100m income from transfer of one unit of

St. Regis condominium would be booked, and income from time share

would increase in high season. In addition, food business would grow in

spending season at the end of year and more branches would be opened.

We maintain our FY2014 earnings forecast; normalized profit is projected to

grow by 15.7%yoy.

- Upgrade our recommendation from HOLD to BUY. 16% upside

We revise up FY2015-2019 net profit forecast by 4%yoy, reflecting

residential project in Phuket comprising 15 units of villas valued at least

B4.5bn (US$10-15m each); three villas are projected to be sold each years

for five years. New fair value (DCF, 9% WACC) is B35 in 2014 and B40 in

2015; FY2015 fair value implies 16% upside. We upgrade our

recommendation from HOLD to BUY.