May 10, 2014

Minor International record first quarter (MINT.BK)

Minor International (MINT) has 4 business segments of Hotel/Spa, Mixed Use, Restaurant and Retail. Some of its more well-known restaurants are Thai Express and Xin Wang Hong Kong Cafe in Singapore. 

It has about 1500 restaurants under various brands in 19 countries. It also invests in or owns and operates a portfolio of 103 hotels and serviced suites with over 12,000 rooms around the world. The company is also involved in the retail trading and contract manufacturing of fashion, cosmetics and household products.


1Q14: Revenue increased 9% (vs. 1Q13). Total expenses are up almost 14%.

Earnings and Dividends

FY13: EPS grew by 17% (vs. FY12). Dividend yield is about 1.46% based on 9/5/2014 closing price.

1Q14: Profit after tax increased by 2.5% to 1.46 billion baht (vs. 1Q13). 
EPS decreased by about 3%. There were also more shares because of warrants and if not, EPS would have increased slightly by 0.7% (vs. 1Q13).

Balance Sheet (FY13)
Total Debt/Equity is about 48.26%.
Total Debt/Net Income is about 6.1 times.
Interest Coverage Ratio is about 5.1 times.

Free cash flow is positive at about 832 million baht, with net income of 4.1 billion baht.

Throughout the year, the group paid 493 million baht in cash dividends and 329 million baht in scrip dividend. 

Interest Rate Exposure (FY13)
The group has 16 billion baht of borrowings at fixed rates, and another 7 billion baht at floating rates. 1.5 billion baht of long term borrowings mature in 2014.

P/E is about 23 times based on FY13 earnings and closing price on 9th May 2014.

4 Main Risks
1. Business Disruption
MINT's profitability and revenues are dependent upon consumer discretionary spending and tourist confidence. This business model is affect by external uncontrollable events such as an economic recession, natural disasters and political unrest. The company has diversified its risk by having operations across Southeast Asia, China, Africa, Indian Ocean, India and the Middle East.

2. Competition
The hospitality business is competitive and profits are seasonal. The restaurant business has low barriers to entry. Retail trading is also a brutal business. 
MINT has a diversified product geography of numerous product offerings and it focuses on being among the top in each market.

3. Risks from new investments
The continued political unrest and economic recession in Thailand justifies MINT's strategy of expanding overseas, especially for AEC 2016. However, the next ThaiExpress or brand it acquires may turn out to be a rotten apple instead.

4. Foreign currency risk
The overseas operations are subject to the fluctuation of foreign currencies when the results are consolidated into the financial statements in baht. Although the majority of debt borrowings are based on fixed interest rate, as of FY13, 30% are at floating rates.

MINT turned in a revenue and EPS(undiluted) increase in the first quarter which is very good considering the political unrest and economic recession. It is to be noted that MINT has geographically diversified operations, even within Thailand. Provincial Thailand has also been showing promising growth as Bangkok continues to overheat.

This growth is largely attributed to the overseas hospitality business and Anantara Vacation Club. 

Thai Revenue per available room (RevPar) increased by 8% consolidated, excluding Bangkok it would have increased 17%.

Overseas RevPar increased almost 50% on high double-digit RevPar growth of MINT-owned hotels in the Maldives and Sri Lanka and managed hotels in the UAE, Indonesia and China.

Personally I find the food at ThaiExpress to be of basic taste and mostly inauthentic. However it would be foolish if I use my tastebuds to measure a company for investment! MINT has a stable of well-established brands (especially Anantara) with a good mix of mid to high end in each segment.

Despite the good result, the share price is downtrending, adopting the general trend of the index. Profitable food companies generally trade around 25 P/E, while Hotel/Tourism operators on the domestic exchange are around upwards of 10. 

Disclaimer: I have no vested interests in MINT (as of 1/1/2014) and don't listen to me, I am just a clueless punter. 


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