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Minor International

Diversified business, diversified risk HOLD

Minor International Plc (MINT)

- 1Q14 normalized profit to grow from every business

We project 1Q14 net profit at B1,323m, falling 15%qoq and 6%yoy, as

B295.4m extraordinary income from capital adjustment would not be

booked in 1Q14. Excluding extraordinary items, 1Q14 normalized profit

is expected to grow by 18.8%yoy.

- For hotel business (37% of total income), the political unrest has been

affecting MINT’s hotels in Bangkok, possibly lowering their 1Q14

occupancy rate to 50% and pressing their RevPar by over 30%yoy.

However, hotels in Bangkok make up only 7% of MINT's total income. At

the same time, hotels in other provinces and abroad have generated

strong income. Thus, overall RevPar is expected to rise by 2.5%yoy.

Income from property business (6% of total income) is expected to drop

by 4.7%yoy to B510m, as no unit of St. Regis condominium has been

transferred. Income from food business (41% total income) is expected

to grow by 9%yoy; though same store sales would drop by 1.8%qoq as

a result of the economic crunch, 24 new branches have been opened

since 4Q13 (162 more since 1Q13), totaling 1,568 branches. Overall,

MINT's normalized income is expected to increase by 4.5%yoy to

B9,324m. We project EBITDA margin to rise from 24.3% in 1Q13 to

25% in 1Q14.

- Hotel and food sectors rebounding after revoking emergency decree

Hotel business in Bangkok has been improving after the emergency

decree is revoked and PDRC stops rallying around important areas in

Bangkok. If the political situation does not escalate, it is likely to return

to normal in next couple month. Occupancy rate of hotels in Bangkok

has dropped by 20% in April (versus 30% cut in 1Q14). At the same

time, hotels in other provinces have continued generating strong profit.

Overall, despite 2%yoy fall in occupancy rate, April RevPar is projected

to rise by 7%yoy thanks to 10%yoy hike in room rate. Food business is

also likely to improve. April (1-20 April) same store sales have

rebounded and grown. Including sales from new branches, income from

food business is expected to rise by 5-10%yoy. We maintain our FY2014

earnings forecast, projecting MINT’s net profit to grow by 7%yoy to

B4.4bn.

- Low season. Limited upside. Hold

We derive FY2014 fair value (DCF, 9.4% WACC) at B26.00, implying

only 4% upside. Also, this is a low season for hotel stocks. We

recommend holding.


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