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Minor International

Least impacted by political unrest, thanks to business diversity

Minor International Plc (MINT)

- 4Q13 net profit estimated at B1,391m or 5%yoy growth

We estimate 4Q13 net profit at B1,391m or the growth of 5%yoy. Slowing hotel

business in Bangkok as a result of the political unrest since December 2013 has

been compensated by strong performance of the hotel business in other

provinces and overseas. Accordingly, overall own-equity hotels' occupancy rate

in 4Q13 has been 71%, while RevPar has increased 10%yoy. For the property

business (11% of total income), B1,020 income is expected from a transfer of

7% of St. Regis condominium (B500m), from a Timeshare project (B400m), and

from selling of a villa at Samui (B120m). In terms of the food business, although

same-store-sales growth has been suppressed at only 0.9% due to the sluggish

domestic consumption, there has been compensation from a launch of 163 new

outlets since 4Q12 (or 80 new outlets since 3Q13) to 1,544 outlets at present.

Consequently, the overall food business (37% of total income) would still grow

by 14.3%yoy. We project 4Q13 income to increase 12%yoy to B9,208m; net

profit margin is estimated at 15%.

- Diversified business structure helps limit political risks

Even though the Bangkok shutdown and invocation of the Emergency Decree

since early 2014 have adversely affected the hotel business, evident by an

occupancy rate during 1-23 January that dropped to 50%, versus 70% of the

same period last year, and RevPar that has decreased 20%yoy, the negative

impact has been alleviated by MINT's advantage of business diversity, both

domestically and internationally. The hotel business in Bangkok comprises only

8% of the company's total operating income, while RevPar of provincial hotels

has risen averagely by 10%. Moreover, the company has been able to hike the

room rate at Maldives continuously. All these positive factors have helped to

limit the effect from domestic politics significantly. Overall RevPar in 1 - 23

January 2014 has still increased 11%yoy. Although the political unrest tends to

drag on, we make a forecast under a conservative method, projecting RevPar in

2014 to increase only 5%, same-store-sales to grow only 2-3%, and new outlets

to increase 8%yoy, resulting in FY2014 profit of B4.4bn or the growth of

10%yoy.

- Buy. 2014 fair value is B26.00, 25% upside implied

Of all hotel entrepreneurs, MINT is likely to get the least effect from the political

turmoil, thanks to its most diversified businesses. 2014 fair value (DCF - WACC

of 9.4%) is B26.00, implying 25% upside. Buy for long-term investment.


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