Minor International: Another strong quarter in the bag
- 4Q24F profit expected at THB3.45bn (+251% y/y); excluding extras, core profit growth to hold firm (+13% y/y, +7% q/q)
- Hotel RevPar growth steady, albeit weighed down with THB appreciation; good momentum persisted QTD
- 4Q24F food SSSG showed improvements across all hubs
- Reiterate BUY with new DCF-based TP of THB36.50
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4Q24F profit to be pumped by extra gains. We estimate MINT’s 4Q24F net profit to come in at THB3.45bn, having surged 251% y/y and 2,210% q/q. The strong profit would be lifted by non-recurring gains, mainly related to forex and derivative contracts. Stripping out extra items, we forecast 4Q24F core profit will come in at THB2.83bn (+13% y/y, +7% q/q), driven by revenue growth and gross margin expansion across all businesses.
Firm hotel performance in local currency. In 4Q24F, we forecast overall RevPar for owned and leased hotels to grow at 4%, mainly supported by a steady growth of average daily room rate (ADR). We note that the mild RevPar growth was weighed down by the THB appreciation against EUR during the quarter. In local currencies, the EU, the Americas, and the Maldives showed healthy growths. Nevertheless, under the Management Letting Rights model for Australia and New Zealand, RevPar growth is expected to be flattish in 4Q24F. Net-net, we estimate hotel revenue will grow 4% y/y in 4Q24F.
For Thailand, RevPar growth is expected to be 14% y/y, mostly driven by 13% ADR growth y/y and increase in OR to 70% (+1ppt y/y) following further tourism recovery.
For Europe & the Americas, RevPar growth is estimated to be 9% in local currency – supported by a 5% growth in ADR and increase in OR to 70% (+2ppt y/y).
The Maldives’ performance is expected to show a solid turnaround with positive double-digit RevPar growth y/y, mostly pushed by an increase in ADR with improving OR by 2ppt y/y.
Australia and New Zealand’s RevPar performance is also expected to be flattish after an OR inch down, offset by an increase in ADR. Nevertheless, OR and ADR in Australia and New Zealand hubs remained healthy at 80% during the period.
Food SSSG improving. In 4Q24F, we expect food revenue to show stronger growth at 3% y/y on the back of store expansion, especially growth in the Thailand hubs. 3Q24F overall SSSG is expected to remain slightly negative at -0.5%. For domestic hubs, SSSG is expected to turn positive at 1.5% y/y due to company efforts and strategy to both sales through dine-in and delivery. Together with continuous store expansion, Thailand food revenue growth should come in at 6% y/y.
SSSG contraction of China hubs is expected to narrow down from -20-30% to -10% in 4Q24F after support from local stimulus measures. Meanwhile, the Australia hubs’ SSS remains slightly negative at -0.5%.
For China, MINT has resumed its expansion in the market which we believe the total food sales in China should contract at 7% to 8% y/y with the contribution of new stores opening. However, for Australia, we still see outlet rationalisation; resulting higher food sales contraction compared to SSSG individually. We estimate the food revenue to contract 4% y/y. Nevertheless, with the sales growth for Thailand hub should be able to support a small growth of overall food revenue y/y in 4Q4F.
EBIT margin remains healthy. We forecast MINT will deliver a healthy EBIT margin of 17.3% (+10bps y/y, 90bps q/q). The firm EBIT margin was mainly supported by better leverage of revenue growth, mostly driven by firm ADR growth.
Meanwhile, we believe management should be able to complete the sales of account receivables of Anantara Vacation Club in 4Q24F, which would lower its net gearing and Debt-to-EBITDA ratio at 0.8x and 4.3-4.35x as targeted. Hence, we expect finance costs to trend down both q/q and y/y given some debt repayment and downtrend of interest rate.
Net-net, core profit margin is expected to improve 60bps y/y and q/q to 7.1% in 4Q24F.
Outlook
Upcoming low season in 1Q25; good momentum to persist y/y. We believe MINT’s quarterly profit should drop q/q in 1Q25 given seasonality. Nevertheless, we expect further y/y performance improvement. On a QTD basis, RevPar in Europe and Thailand should remain the same as in 4Q24F. We note that management saw some cancellations in Thailand from Chinese tourists due to the kidnapping incident involving a Chinese movie star. However, the impact is limited, and the company has already seen a resumption of Chinese tourists’ bookings.
Blended food SSSG QTD was mostly flattish, slightly improved from a small contraction in 4Q24. Operating margin is also expected to continue to expand y/y, riding with growing ADR. Finance costs should continue to trend down q/q after the debt repayment and rate cut from European Central Bank.
Recommendation
Reiterate BUY with a new DCF-based TP of THB36.50. We finetuned our core earnings forecast and raise it by 5% for FY24-26F, mostly on better-than-expected better operating margin and RevPar growth of 5% (3% previously). We also reflect the huge extra gains expected to come in in 4Q24F for FY24F.
Nevertheless, we have conservatively assumed a terminal growth rate of 1.5% instead of 2.0%. As a result, our DCF-based TP slid from THB38.00 to THB36.50. The stock is now trading at an attractive EV/EBITDA of 4.8x and a P/BV of 1.6x (-3SD of its five-year historical average). With steady core earnings and upside from the new TP, we maintain our BUY call.
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