Minor International

Q4 2012 earnings beat all expectations; record Q1 2013 core profit is likely

Minor International Plc (MINT)

Better than we expected

MINT posted a core profit of Bt1.2bn for 4Q12, a jump of 152% YoY and 102% QoQ. The result was 34% above our estimate, due to higher revenue and other income than expected, lower tax expenses than assumed, and a unit sale at The Estate Samui. 4Q12 net profit was 20% above the consensus number. The 4Q11 result set a low base (flooding necessitated a Bt238m write-off asset and cause damage to inventory).

In line with all estimates, MINT announced an FY12 DPS of Bt0.30 (a 1.3% yield). XD on April 11; payment on April 30.

Results highlights

The impressive earnings growth was driven by expansion of 14% YoY in Hotel revenue (to Bt3.1bn) and 9% YoY in Food receipts (to Bt2.9bn) and a 22% jump in residential sales (to Bt965m). Hotel RevPar in 4Q12 rose 9% YoY—a 71% mean occupancy rate (68% in 4Q11 and 68% in 3Q12) and a 5% room rate rise. Food business TSSG was 11.4% YoY and SSSG was 4.6%. Residential sales jumped by 22% YoY and 36% QoQ, driven by timeshare income (and a unit sale at The Estate Samui). The QoQ profit growth was due to seasonal improvements across all businesses.

In 4Q12, the SG&A/sales ratio fell by 4% YoY and 2% QoQ to 38.2%, thanks to revenue expansion. The extremely low effective tax rate of 2% was due to tax restructuring for oversea businesses. Core margin increased from 10% in 4Q11 to 14% in 4Q12 (8% in 3Q12). The net gearing ratio improved from 1.2x at end-Sept to 1.1x end-Dec.

Outlook

We expect a record core profit for 1Q13 (strong YoY and QoQ growth), driven by high season for tourism. Besides, the loss contribution from China will diminish in the quarter following MINT's acquisition of the Beijing Riverside & Courtyard restaurant chain (49% initial stake).

What's changed?

We have revised up our earnings forecasts by 8percent for FY13 and by 7percent for FY14 to incorporate the positive surprises in the 4Q12 results. We expect good profit growth of 20percent for this year (fully diluted EPS up 9%). Hotel RevPar expansion is forecast at 13% and 12.5% of food TSSG. New acquisitions and/or the details of a residential project (Anantara Residences Phuket) would probably mean scope for upside to our projection.

Recommendation

Our BUY rating stands unchanged with a YE13 target price upgrade to Bt29 (from Bt26.80) to reflect in our revised-up earnings forecast (our target is pegged to a 10% discount to DCF value). MINT trades at an FY13 PER of 23.7x, 0.96SD above its FY06-12 mean. A consensus earnings forecast upgrade would probably boost the share price.