Minor International

Good year ahead for hotel and food business Neutral

Minor International Plc (MINOR)

2013 another good year for hotels. The positive industry backdrop of a vibrant

tourism industry should bolster MINT's hotel business this year. MINT targets 72-73%

occupancy rate in 2013 (up from 69% in 2012) and expects its ARR to increase as it is

focusing on the high-yield segment of tourists from emerging countries, such as China

and Russia, whose markets are expanding. In 2012, China and Russia together

contributed only 10% of MINT's total room nights. However, these markets generated

an ARR that was double or triple MINT's average ARR (Figure 1). In 2013, we estimate

RevPar to expand 12%, backed by 73% occupancy rate and 5% ARR growth. Excluding

Oaks, a relatively stable business, operations in January-February were strong with 11-

12% RevPar growth, mainly driven by the high occupancy rate of 75-76%.

AVC: adding more inventory in 2013. Anantara Vacation Club (AVC)'s 2012

performance was good, with sales of US$80mn, up into the black after losses in 2011,

its first year of operations. MINT expects profit from AVC to be more substantial in

2013 onward, as a marketing push and more representative offices plus more

inventory in more countries has made its brand better known. MINT will add 100 villas

(i.e. inventory) in Phuket and China this year, adding to the 46 villas in 2012 in Thailand,

Bali, Australia and New Zealand and plans to have more than 400 villas by 2017.

Residential business. 27% of the St. Regis Residence remains unsold, but MINT

expects these to sell this year. It plans to launch another residential project to provide

steady earnings over the next five years, Anantara Residence Phuket, the first project

under MINT's own brand. This will be set up concurrent with the new Anantara Phuket

Hotel (formerly Bundarika Resort & Suites) and sales are expected to begin in 2H13.

The project value will be Bt1.0-3.0bn with 17-20 villas priced at US$3-5mn per villa.

Food business - growing and improving. MINT targets 4-5percent SSS growth this year.

It is placing emphasis on improving its operations in China and expects food operations

in China to reach breakeven this year after several years of losses of ~Bt100mn/year.

Backing this will be the profit from Riverside & Courtyard, the recent investment in

January, and improvement in current operations by closing poorly performing outlets

(mainly The Pizza Company) and adding Sizzler outlets, which are doing better than

The Pizza Company.

Raising forecasts. We raise MINT's net profit by 13% in 2013 and 18% in 2014 mainly in

response to a lower effective tax rate of 12percent from 18% after MINT's restructuring of its

overseas business in 4Q12 reduced its tax expenses; our projections for core operations

changes little. The changes raise our 2013 TP to Bt28 (from Bt25).

ST catalysts: Strong 1Q13 and laggard performance. We maintain Neutral, with

short-term catalysts lying in strong 1Q13 earnings (tourism high season) plus its

laggard performance compared to direct peer CENTEL: YTD, MINT price has risen 31% vs.

CENTEL's 58%. We note that the final exercise date for MINT-W4 is May 18, 2013 and

there will be a 6% dilution if all warrants are exercised. This may pressure share price at

that time, but our 2013 TP at Bt28 is based on fully-diluted shares.