Minor International MINT

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2 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Minor International MINT 2QCY13 net profit up 23.3% y-y Bloomberg Reuters MINT TB MINT.BK Report type: Company Update Company Overview MINT is one of the largest hospitality and leisure companies in the Asia Pacific region. It operates hotels, resorts, spas and franchised restaurants. Hotel and food businesses are the major revenue contributors for MINT. MINT posted a 23.3% y-y rise in 2QCY13 net profit to Bt429.17mn driven by a solid growth in restaurant business, which reported the strongest sales growth among all businesses of 15.4% y-y. The number of food outlets to be opened in 2HCY13 will be higher than in 1HCY13. In hotel business, occupancy rate and average RevPar look set to remain on the rise in 2HCY13 on the back of rising tourist numbers. In real estate business, another 11% of total sellable area of the St. Regis Residences is scheduled to be realized as revenue in 2HCY13. The portfolio of hotel properties under management contracts would expand further in 2HCY13. We leave our CY13 earnings view for MINT unchanged. We call MINT shares a BUY with a Bt29/share target price. What is the news? MINT reported a 23.3% y-y rise in 2QCY13 net profit to Bt429.17mn driven largely by a solid growth in restaurant business. In this period, (1) revenue from restaurant business grew the most among all businesses at 15.4% y-y buoyed by the addition of 145 food outlets, bringing the total to 1,419 food outlets after the consolidation of Beijing Riverside & Courtyard in China though a negative SSSG of The Pizza Company hit by the restructuring of its menu strategy and marketing plans limited total SSSG to a mere 1.1% y-y, (2) revenue from hotel & mixed use business rose 3.7% y-y as a drop in number of equity-owned hotel rooms due to the temporary closure of two owned hotels for renovation and the permanent closure of one hotel was offset by a steady increase in occupancy rates and average RevPar on rising tourist numbers and a rise in revenue from real estate development and timeshare revenue, and (3) SSSG of retail trading and contract manufacturing business shrank 4% y-y as a result of eroding purchasing power but TSSG managed to eke out growth of 1% driven by improved revenues from fashion and contract manufacturing businesses. How do we view this? In 2HCY13, growth momentum looks set to continue in y-y terms. The key drivers of growth would be (1) strong prospects for restaurant business boosted by the plan to increase the number of food outlets in 2HCY13 compared to 1HCY13, the improvement in The Pizza Company and revenue contribution from Beijing Riverside & Courtyard and (2) a bright outlook for hotel operations buoyed by the prospect of a steady rise in occupancy rates and average RevPar, another 11% of total sellable area of the St. Regis Residences scheduled to be realized as revenue in 2HCY13 and a further rise in hotel management fee on a growing portfolio of hotel properties under management contracts and an the acquisition of a new hotel brand. Retail trading and contract manufacturing business may be a cause for concern in the face of shrinking purchasing power. Investment Actions? We call MINT shares a BUY with a DCF-based target price of Bt29/share. Minor International Phillip Securities Research Pte Ltd 20 August 2013 Rating 1.00 Buy - Previous Rating 1.00 Buy Target Price (Bt) 29 - Previous Target Price (Bt) 29 Closing Price (Bt) 23 Expected Capital Gains (%) 25.5% Expected Dividend Yield (%) 1.5% Expected Total Return (%) 27.1% Raw Beta (Past 2yrs w eekly data) 1.10 Market Cap. (USD mn) 2,946 Enterprise Value (USD mn) 3,572 Market Cap. (Bt mn) 92,372 Enterprise Value (Bt mn) 110,708 3M Average Daily T/O (mn) w eek range Closing Price in 52 w eek range Major Shareholders (%) 1. MINOR Holding (Thai) Co.,Ltd 2. Mr. William Ellw ood Heinecke 3. Mr.Nithi Osathanugrah CG Report Volume, mn MINT TB EQUITY SETI rebased (Excellent) 16.0 Key Financial Summary FYE 12/11 12/12 12/13F 12/14F Revenue (Btmn) 26,137 32,900 38,399 44,338 Net Profit Btmn) 2,880 3,409 4,066 4,670 EPS (Bt) Net Profit, adj. (Btmn) 1,623 3,234 4,066 4,670 EPS, adj. (Bt) P/E (X),adj BVPS (Bt) P/B (X) DPS (Bt) Div. Yield (%) Source: Bloomberg, PSR est. *All multiples & yields based on current market price Valuation Method DCF (Wacc=8.94%, Terminal g = 3%) Analyst Phillip Research Team research@phillip.com.sg 0% 50% 100% MCI(P) 194/11/2012 Ref. No.: TH2013_ of 5

3 Minor International MINT Phillip Securities Research Pte Ltd 20 August QCY13 net profit up 23.3% y-y MINT posted a 23.3% y-y rise in 2QCY13 net profit to Bt429.17mn driven largely by revenue growth especially from restaurant business and falling expenses. Total revenue leapt 8.5% y-y to Bt7,887mn. In this period, revenue from restaurant business grew the most among all businesses at 15.4% y-y to Bt3,522mn and contributed up to 44.7% of total revenue. Much of the growth was due chiefly to the addition of 145 food outlets, bringing the total to 1,419 food outlets thanks to the consolidation of Beijing Riverside & Courtyard in China, which was acquired late last year and 13 more outlet openings in 1QCY13. SSSG grew a mere 1.1% y-y in 2QCY13 against a 6.5% y-y rise in 1QCY13. In this period, the weak SSSG was largely dragged down by a negative SSSG of The Pizza Company hit by the restructuring of its menu strategy and marketing plans. The Pizza Company contributed 27% of total revenue from restaurant business. Revenue from hotel & mixed use business edge up 3.7% y-y as a combination of factors including (i) a rise in average occupancy rate for its hotel portfolio in Thailand to 62% in 2QCY13 from 58% in 2QCY12 on the back of higher tourist numbers, (ii) a 9.8% y-y jump in average RevPar to Bt3,446 per night and (iii) a 15% y-y rise in revenue from real estate development and timeshare revenue offset the negative impact of (i) a drop in number of equity-owned hotel rooms due to the permanent closure of Hua Hin Marriott Resort & Spa since Jul 2012, the temporary closure of Anantara Bophut Samui Resort & Spa and Anantara Veli Resort & Spa, Maldives for renovation, (ii) the temporary closure of Royal Garden Plaza Bangkok for renovation and (iii) lower revenue contribution from OAKS due to the strength of the baht. Revenue from retail trading and contract manufacturing business inched up 3.2% y-y as a 1% y-y increase in TSSG boosted by improved revenue from fashion business and the resumption of full operations of NMT manufacturing plant after the Great Flood in 2011 offset a 4% y-y contraction in SSSG weighed down by eroding purchasing power. Total costs rose a mere 4.3% y-y thanks largely to a drop in costs of sales at real estate business. SG&A expenses went up 16.3% y-y. Other income and profits from affiliates climbed upwards. Effective tax rate nearly halved to 18.2% in 2QCY13 from 35.5% in 2QCY12. has three award-winning properties under management, in Jul 2013, and (ii) the acquisition of Cypress Lakes Resort, a 232 villa resort in Hunter Valley, Australia and the acquisition of an additional stake in Tidal Swell, which has four hotel properties under management by its subsidiary OAKS. By the end of this year, MINT expects the number of purely managed hotel rooms to rise to 3,365 from 2,023. In real estate business, another 11% of total sellable area of the St. Regis Residences is scheduled to be realized as revenue in 2HCY13 after 6% of total sellable area was transferred and realized as revenue in 1HCY13. Note that the St. Regis Residences has been already fully sold out and revenue recognition for the remainder is expected in 2HCY13. The increasing number of rooms should also keep growth going at Anantara Vacation Clup, a pointbased vacation club under its own brand. In retail trading and contract manufacturing business, growth is expected to remain weak as it is most vulnerable to the risk of shrinking consumer purchasing power among all businesses. CY13 earnings view and investment rating unchanged We leave our CY13 net profit outlook for MINT unchanged at Bt4,066mn. Our target price is also unchanged at Bt29/share. The target is DCF-based, assuming WACC of 8.94% and terminal growth of 3%. We call MINT shares a BUY. Positive momentum set to continue in 2HCY13 The positive momentum looks set to continue in 2HCY13. In restaurant business, The Pizza Company is likely to perform better after a hiccup in 2QCY13 revenue. Even though SSSG of The Pizza Company remained in negative territory in Jul 2013, we think total SSSG in restaurant business in 2HCY13 would be better than in 2QCY13. The number of food outlets to be opened in 2HCY13 would be higher than in 1HCY13. MINT has also formed a strategic partnership with Al Nasser Holdings, a UAE-based multi-disciplined business conglomerate, which currently holds over 70 companies under its umbrella in multiple sectors to make a foray into food and beverages business in the Middle East and North Africa. In hotel business, the impact from the temporary closure of hotels for renovation is likely to persist but hotel occupancy rates look set to remain on the rise in y-y terms on rising tourist numbers and average RevPar should keep rising as the renovated hotels are slated to reopen before the end of this year. Growth momentum in hotel management fee is set to continue after (i) the acquisition of the luxury boutique hotel brand Per AQUUM, which currently 2 of 5

4 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Minor International MINT Phillip Securities Research Pte Ltd 20 August 2013 Ratings History Target Price Market Price Source: Bloomberg, PSR Phillip Group Rating System Total Returns Recommendation Rating > +20% Buy 1 +5% to +20% Accumulate/Trading Buy 2-5% to +5% Neutral 3-5% to -20% Reduce/Trading Sell 4 >-20% Sell 5 Remarks We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation 3 of 5

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6 PHILLIP RESEARCH STOCK SELECTION SYSTEMS Total Return Recommendation Rating Remarks >+20% Buy 1 >20% upside from the current price +5% to +20% Accumulate 2 +5% to +20%upside from the current t price -5% to +5% Neutral 3 Trade within ± 5% from the current price -5% to -20% Reduce 4-5% to -20% downside from the current price <-20% Sell 5 >20%downside from the current price We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation GENERAL DISCLAIMER This publication is prepared by Phillip Securities (Hong Kong) Ltd ( Phillip Securities ). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below. 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7 Contact Information (Regional Member Companies) SINGAPORE Phillip Securities Pte Ltd Raffles City Tower 250, North Bridge Road #06-00 Singapore Tel : (65) Fax : (65) Website: HONG KONG Phillip Securities (HK) Ltd Exchange Participant of the Stock Exchange of Hong Kong 11/F United Centre 95 Queensway Hong Kong Tel (852) Fax (852) Websites: INDONESIA PT Phillip Securities Indonesia ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A Jakarta Indonesia Tel (62-21) Fax (62-21) Website: THAILAND Phillip Securities (Thailand) Public Co. Ltd 15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok Thailand Tel (66-2) / Fax (66-2) Website UNITED KINGDOM King & Shaxson Capital Limited 6th Floor, Candlewick House, 120 Cannon Street, London, EC4N 6AS Tel (44-20) Fax (44-20) Website: MALAYSIA Phillip Capital Management Sdn Bhd B-3-6 Block B Level 3 Megan Avenue II, No. 12, Jalan Yap Kwan Seng, Kuala Lumpur Tel (603) Fax (603) Website: JAPAN PhillipCapital Japan K.K. Nagata-cho Bldg., 8F, Nagata-cho, Chiyoda-ku, Tokyo Tel (81-3) Fax (81-3) Website: CHINA Phillip Financial Advisory (Shanghai) Co. Ltd No 550 Yan An East Road, Ocean Tower Unit 2318, Postal code Tel (86-21) Fax (86-21) Website: FRANCE King & Shaxson Capital Limited 3rd Floor, 35 Rue de la Bienfaisance Paris France Tel (33-1) Fax (33-1) Website: UNITED STATES Phillip Futures Inc 141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building Chicago, IL USA Tel Fax AUSTRALIA PhillipCapital Australia Level 37, 530 Collins Street, Melbourne, Victoria 3000, Australia Tel (613) Fax (613) Website: