Minor International - The Nation

Bualuang Securities August 9, 2012 12:27 pm

Minor International Plc (MINT)

Below: MINT posted a core profit of Bt363m for 2Q12, up 30% YoY but down 72% QoQ. The result was 14% below our estimate and 20% short of the consensus, due to slimmer-than-expected GM (54.4%; our estimate was 56%). 1Q12 net profit was Bt409m, up 46% YoY, boosted by Bt72m in FX gains. Results highlights: The good YoY core earnings growth was driven by: 1) Hotel revenue of Bt2.5bn, up by 70% YoY with the consolidation of Oaks, 2) hotel RevPar growth of 20% YoY, led by strong Hotel volume (a 66% occupancy rate versus 56% in 2Q11) and 2% room rate growth, and 3) a good Food operation?TSSG of 13.6% and SSSG of 6.5%. The QoQ weakness was due to Hotel business low season and 33% slippage in residential income (Bt300m in St.Regis condo revenue in 2Q12 versus Bt650m from St.Regis and sales of The Estate Samui in 1Q12). In 2Q12, mean GM rose only 40 bps YoY (below all estimates), due to the high base set last year. 2Q11 GM was skewed up 2.7% (Bt89m), as MINT realized one-time gains from the Oaks consolidation (in June 2011). The SG&A/sales ratio declined by 3.4% YoY in tandem with top-line expansion. The net gearing ratio inched up from 1.16x at end-March to 1.25 at end-June. Outlook: We expect strong YoY earnings growth in 3Q12 and some QoQ expansion. Residential income will jump YoY, led by timeshare revenue. St.Regis condo sales are expected to rise QoQ (69% booked). Looking forward to 4Q12, high season for tourism will make for impressive YoY and QoQ profit growth. What's changed? Despite the disappointing 2Q12 number, 1H12 profit accounts for 57% of our full-year forecast and (58% of the consensus), so our FY12 projection stands unchanged. Recommendation: Since we went tactically bullish on the sector (see our July 9 report), MINT's share price had increased 8% and outperformed the SET (up 0.5%). The disappointing 2Q12 result may trigger short-term selling. But for the long-term, we maintain our BUY rating and a YE13 target price of B17.20 (a 20% discount to our DCF model?13.5% WACC and a 2% terminal growth rate). MINT currently trades at FY13 PER of 16x, 1SD below its FY06-11 mean.

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