Minor International

Minor International Plc (MINT)

 

- 2Q15 normalized profit as expected  

2Q15 normalized profit was B541m, slipping 1.2%yoy (as expected) although operating revenue was B9.38m, rising 10%yoy. Revenue from the hotel business (41% of total revenue) grew 31%yoy since MINT had 3,600 new rooms from investment, compensating for a 5%yoy drop in average room rate due to new hotels with room rates below average. Revenue from the property business (6% of total revenue) fell 20%yoy to B613m because there was no transfer of St Regis condominium like in 2Q14. Revenue from the food business (44% of total revenue) climbed 3%yoy mainly from new branches, while same store sales fell 1.6%. However, EBITDA margin decreased from 17.5% in 2Q14 to 16.7% as profit margin from the food business declined; its food business in Thailand slowed down, and restaurants in Singapore underwent a major renovation. In addition, interest expense increased by 9% to B327m due to bonds issuance, weakening normalized profit margin to 5.8%. 

- To rebound in 2H15, to prosper in 4Q15  

MINT's profit is projected to rebound in 3Q15 and prosper in 4Q15. For the hotel business, overall RevPar from July 1-22 rose by 3%yoy, likely to continue rebounding in 4Q15 (high season), and MINT would recognize revenue from one new own-equity hotel and two new hotels under its ownership in 2H15. For the food business, although same store sales would not recover significantly, opening of new branches would boost sales and more effective cost control plans would be used. The property business would be the main driving force in 2H15 since MINT would start recognizing revenue from Anantara Phuket Villas projects; four out of 15 villas are currently available for sales and six villas are already reserved. We expect two villas to generate revenue in 2015 (US$10m each). Overall, we project MINT's FY2016 normalized profit at B4.59bn, rising 6%yoy. 

- BUY. 27% upside  

FY2015 fair value (DCF, 9% WACC) is B34.00, implying 27% upside. We reiterate BUY.