Minor International Pcl (MINT TB)

Transcription

1 BUY (Unchanged) TP: Bt (From: Bt ) 17 SEPTEMBER 2014 Change in Numbers Upside : 19.7% Minor International Pcl (MINT TB) Growth with M&A Thanachart Thanachart Securities Securities We raise MINT s long-term earnings by 13% from 2018F to reflect the additional income from its M&A transactions during We foresee MINT continuing to invest in hotel, food, and mixedused projects in various tourist destinations which could present upside to our numbers. Maintain BUY. Boosting earnings and TP We have raised MINT s long-term earnings by 13% from 2018F to reflect: 1) the additional income from 4 recent acquisition deals in hotel, food and mixed-use projects in Thailand, Africa and Australia last month, 2) stronger-than-expected hotel and food businesses, particularly overseas, 3) higher-than-expected revenue from hotel management services which flow almost directly to the bottom line, and 4) the better-than-expected gross margin of the Anantara Vacation Club. As a result, we lift our DCF-based 12-month TP to Bt41.0/share (from Bt32.0 previously). We maintain our BUY rating on MINT. More active in hotel acquisitions MINT is being more aggressive in acquisitions and joint-venture investments. Given that MINT has set a fiveyear ( ) acquisition capex budget of Bt10-15bn, this could imply Bt3bn in acquisition capex p.a. (we note the company has spent Bt5.6bn on acquisitions YTD). We forecast MINT s hotel revenue including from its owned, joint-venture and managed hotels to increase by 12% y-y in 2015, mainly driven by the solid performances of its hotels overseas. In addition, recently acquired hotels with a high base of room rates such as hotels in the United Arab Emirates, the Maldives and its Per AQUUM hotel brand, have resulted in a lift in MINT s hotel portfolio average room rate. Improving food business MINT s food businesses in Thailand, Singapore and China performed better than we had expected in 2Q14. We expect the improving momentum to continue in 2015, and at a stronger pace than we had anticipated. This leads us to raise MINT s food revenue by 10% across the board. Note that revenue contributions from food businesses in Thailand, Singapore, China and Australia made up 67%, 18%, 12% and 1%, respectively, of MINT s total food revenue in 1H14. New luxury real estate project We believe we are conservative on MINT s real estate business including the Estate Samui, St. Regis Residences, Anantara Vacation Club and upcoming luxury project The Residences by Anantara Layan Phuket, due to be launched in 4Q14. The Residences Anantara Layan comprises 15 luxury pool villas with a sales target of US$8-10m per villa. We incorporate only 2 villas being sold each year versus the company s target of 4. We forecast MINT s real estate revenue to grow 12% y-y in 2015, driven by higher contribution from Anantara Vacation Club and additional income from the Residences Anantara Layan Phuket. COMPANY VALUATION KALVALEE THONGSOMAUNG kalvalee.tho@thanachartsec.co.th Y/E Dec (Bt m) 2013A 2014F 2015F 2016F Sales 34,669 38,224 42,039 45,892 Net profit 4,101 4,437 5,442 6,324 Consensus NP 4,477 5,403 6,320 Diff frm cons (%) (0.9) Norm profit 3,865 4,437 5,442 6,324 Prev. Norm profit 4,450 5,232 6,039 Chg frm prev (%) (0.3) Norm EPS (Bt) Norm EPS grw (%) Norm PE (x) EV/EBITDA (x) P/BV (x) Div yield (%) ROE (%) Net D/E (%) PRICE PERFORMANCE (Bt/shr) MINT Rel to SET Index (%) (10) 15 (20) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 COMPANY INFORMATION Price as of 16-Sep-14 (Bt) Market cap (US$ m) 4,251.0 Listed shares (m shares) 4,001.6 Free float (%) 51.0 Avg daily turnover (US$ m) M price H/L (Bt) 36.50/18.70 Sector Food & Bev Major shareholder Group of Mr. William Heinecke 28% Sources: Bloomberg, Company data, Thanachart estimates Please see the important notice on the back page

2 COMPANY NOTE MINT KALVALEE THONGSOMAUNG Ex 1: MINT s Stronger Presence Overseas (%) International Thailand H F Source: Company data Ex 2: Growth With M&A (Bt m) Normalized profit (LHS) (y-y %) 8,000 Growth (RHS) 24 7, , , , ,000 2, , F 2015F 2016F 2017F Ex 3: MINT s Revenue And Profit Breakdown By Business Segment In 1H14 Hotel & Mixeduse Revenue Retail trading 9% Net profit Retail trading 3% 48% Food 43% Hotel & Mixeduse 61% Food 36% Source: Company data Ex 4: MINT s Capex Supported By Its Strong Balance Sheet Acquisition (LHS) Retail trading (LHS) (Bt m) Hotel & mixed-use (LHS) Food (LHS) 10,000 Net D/E (RHS) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, F 2015F 2016F (x) THANACHART SECURITIES DAIWA CAPITAL MARKETS 2

3 COMPANY NOTE MINT KALVALEE THONGSOMAUNG Ex 5: 12-month DCF-based TP Calculation (Bt m) 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F Terminal Value EBITDA 6,893 7,721 8,211 9,283 10,804 11,554 12,321 13,129 13,969 14,846 15,836 16,873 Free cash flow 1,823 4,063 5,472 6,371 7,911 8,641 9,408 10,160 11,007 11,840 12,756 13, ,157 PV of free cash flow 1,818 4,052 4,705 5,079 5,848 5,923 5,978 5,986 6,013 5,997 5,990 6, ,103 Risk-free rate (%) 4.5 Market risk premium (%) 7.5 Beta 0.8 WACC (%) 7.8 Terminal growth (%) 2.0 Enterprise value - add investments 176,692 Net debt (2014F) 21,173 Minority interest 1,849 Equity value 153,670 # of shares 4,011 Equity value/share THANACHART SECURITIES DAIWA CAPITAL MARKETS 3

4 COMPANY NOTE MINT KALVALEE THONGSOMAUNG Valuation Comparison Ex 6: Valuation Comparison With Regional Peers EPS growth PE EV/EBITDA Div. Yield ROE Name BBG Code Country 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F (%) (%) (x) (x) (x) (x) (%) (%) (%) (%) Mirvac Group MGR AU Australia (1.6) Huatian Hotel Group CH China (35.3) na na na na Emei Shan Tourism CH China Shanghai Jin Jiang Int l 2006 HK China (37.5) Beijing Capital Tourism CH China na na na na na na Jinling Hotel Corp CH China na na na na Hongkong & Shanghai 45 HK Hong Kong 11.5 (1.0) na Shangri-La Asia 69 HK Hong Kong na Mandarin Oriental Int l MAND SP Singapore (11.6) Banyan Tree Holdings BTH SP Singapore (49.8) na na Hotel Properties HPL SP Singapore (24.7) na na na na IGB Corp Bhd IGB MK Malaysia Genting Malaysia Bhd GENM MK Malaysia (9.8) Indian Hotels IH IN India na na na na 3.4 Hotel Shilla KS South Korea na Ambassador Hotel 2704 TT Taiwan na na na na Resorttrust Inc 4681 JP Japan Central Plaza Hotel* CENTEL TB Thailand (3.7) Erawan Group* ERW TB Thailand na na na na 4.6 Minor International* MINT TB Thailand Average Note: * Thanachart estimates, using normalized EPS Based on 16 September 2014 closing prices THANACHART SECURITIES DAIWA CAPITAL MARKETS 4

5 APPENDIX MINT KALVALEE THONGSOMAUNG COMPANY DESCRIPTION COMPANY RATING Minor International Pcl (MINT) owns and operates hotels and restaurants in Thailand and abroad. The company engages in the international hospitality business including hotels and resorts, spas, restaurant franchises, residence, mixed-use projects and lifestyle brand distributors and contract manufacturers. Manage ment Financial management Risk manage ment Rating Scale Very Strong 5 Strong 4 Good 3 Liquidity *Corp. governa nce Fair 2 Weak 1 None 0 Source: Thanachart Source: Thanachart; *CG Awards THANACHART S SWOT ANALYSIS S Strength Well-received own hotel brands i.e. Anantara, Oaks, Avani, Per AQUUM etc. W Weakness Highly exposed to Thailand s upscale hotel oversupply. MINT s restaurant brands are the leaders in each category. Geographical diversification of hotel footprint. Strong financial position with a low net D/E ratio. O Opportunity Strategic investments and acquisitions around the world. Strong growth in global consumption. Development of residential projects to maximize profitability. T Threat Fiercer competition among hotel operators leading to obstacles to unlocking its profitability. Competition among restaurant operators both at home and abroad. CONSENSUS COMPARISON Consensus Thanachart Diff Target price (Bt) % Net profit 14F (Bt m) 4,477 4,437-1% Net profit 15F (Bt m) 5,403 5,442 1% RISKS TO OUR INVESTMENT CASE Thailand s political turmoil, natural disasters and disease outbreaks. Slower domestic and global economic and consumption growth. Consensus REC BUY: 13 HOLD: 6 SELL: 1 HOW ARE WE DIFFERENT FROM THE STREET? Our TP is 11% higher than the consensus as we have factored in recent acquisition deals which we see ultimately boosting MINT s long-term earnings growth. However, our F earnings are in line with consensus. We see MINT s businesses strengthening overall in Sources: Bloomberg consensus, Thanachart estimates Source: Thanachart THANACHART SECURITIES DAIWA CAPITAL MARKETS 5

6 FINANCIAL SUMMARY MINT KALVALEE THONGSOMAUNG MINT continues to acquire more projects, presenting potential upside to our forecasts INCOME STATEMENT FY ending Dec (Bt m ) 2011A 2013A 2014F 2015F 2016F Sales 26,137 34,669 38,224 42,039 45,892 Cost of sales 11,267 14,549 16,000 17,259 18,901 Gross profit 14,869 20,120 22,225 24,781 26,992 % gross margin 56.9% 58.0% 58.1% 58.9% 58.8% Selling & administration expenses 12,513 16,504 17,889 19,632 21,294 Operating profit 2,357 3,616 4,336 5,148 5,697 % operating margin 9.0% 10.4% 11.3% 12.2% 12.4% Depreciation & amortization 1,980 2,465 2,557 2,572 2,514 EBITDA 4,337 6,081 6,893 7,721 8,211 % EBITDA margin 16.6% 17.5% 18.0% 18.4% 17.9% Non-operating income 674 1,501 1,232 1,346 1,462 Non-operating expenses Interest expense (879) (1,027) (1,011) (961) (871) Pre-tax profit 2,152 4,090 4,557 5,534 6,289 Income tax After-tax profit 1,737 3,415 3,896 4,704 5,345 % net margin 6.6% 9.9% 10.2% 11.2% 11.6% Shares in affiliates' Earnings ,057 Minority interests (47) (80) (65) (71) (78) Extraordinary items NET PROFIT 2,880 4,101 4,437 5,442 6,324 Norm alized profit 1,954 3,865 4,437 5,442 6,324 EPS (Bt) Normalized EPS (Bt) BALANCE SHEET FY ending Dec (Bt m ) 2011A 2013A 2014F 2015F 2016F ASSETS: Current assets: 7,358 10,632 9,148 9,328 10,162 Cash & cash equivalent 1,146 3,370 1,900 1,400 1,500 Account receivables 2,344 3,332 2,723 2,995 3,269 Inventories 1,466 1,675 2,038 2,199 2,408 Others 2,402 2,255 2,486 2,735 2,985 Investments & loans 4,593 6,941 6,941 6,941 6,941 Net fixed assets 16,914 21,745 22,967 23,675 23,541 Other assets 12,758 20,618 22,733 25,002 27,293 Total assets 41,623 59,936 61,789 64,946 67,938 Strong balance sheet, in our view LIABILITIES: Current liabilities: 8,587 10,958 8,761 8,998 9,104 Account payables 3,992 4,998 3,638 3,925 4,298 Bank overdraft & ST loans 1, ,200 1,122 1,007 Current LT debt 2,406 3,696 2,625 2,454 2,202 Others current liabilities 1,091 1,293 1,298 1,498 1,597 Total LT debt 16,283 18,591 19,248 17,996 16,150 Others LT liabilities 1,818 3,512 3,872 4,259 4,649 Total liabilities 26,688 33,062 31,881 31,254 29,903 Minority interest 567 1,784 1,849 1,921 1,999 Preferreds shares Paid-up capital 3,275 4,001 4,011 4,011 4,011 Share premium 3,215 7,332 7,332 7,332 7,332 Warrants Surplus (851) (207) (207) (207) (207) Retained earnings 8,728 13,964 16,923 20,636 24,901 Shareholders' equity 14,367 25,090 28,058 31,772 36,037 Liabilities & equity 41,623 59,936 61,789 64,946 67,938 THANACHART SECURITIES DAIWA CAPITAL MARKETS 6

7 FINANCIAL SUMMARY MINT KALVALEE THONGSOMAUNG CASH FLOW STATEMENT FY ending Dec (Bt m ) 2011A 2013A 2014F 2015F 2016F Earnings before tax 2,152 4,090 4,557 5,534 6,289 Tax paid (361) (473) (722) (742) (936) Depreciation & amortization 1,980 2,465 2,557 2,572 2,514 Chg In w orking capital 1,015 (78) (1,114) (146) (110) Chg In other CA & CL / minorities (526) Cash flow from operations 4,260 6,814 5,719 7,892 8,654 We have factored in committed capex, but not acquisition capex yet Capex (8,662) (6,012) (3,780) (3,280) (2,380) ST loans & investments LT loans & investments (756) (1,645) Adj for asset revaluation Chg In other assets & liabilities 1,143 (1,676) (1,754) (1,882) (1,901) Cash flow from investm ents (8,275) (9,333) (5,534) (5,162) (4,281) Debt financing 5,392 (938) (186) (1,500) (2,214) Capital increase 94 3, Dividends paid (490) (1,185) (1,478) (1,729) (2,059) Warrants & other surplus (991) Cash flow from financing 4,005 2,187 (1,655) (3,229) (4,273) Free cash flow (4,402) 802 1,939 4,612 6,274 Low trading EV/EBITDA supported by high earnings growth VALUATION FY ending Dec 2011A 2013A 2014F 2015F 2016F Normalized PE (x) Normalized PE - at target price (x) PE (x) PE - at target price (x) EV/EBITDA (x) EV/EBITDA - at target price (x) P/BV (x) P/BV - at target price (x) P/CFO (x) Price/sales (x) Dividend yield (%) FCF Yield (%) (3.2) (Bt) Normalized EPS EPS DPS BV/share CFO/share FCF/share (1.1) THANACHART SECURITIES DAIWA CAPITAL MARKETS 7

8 FINANCIAL SUMMARY MINT KALVALEE THONGSOMAUNG Earnings growth with M&A FINANCIAL RATIOS FY ending Dec 2011A 2013A 2014F 2015F 2016F Grow th Rate Sales (%) Net profit (%) 1, EPS (%) 1, Normalized profit (%) Normalized EPS (%) Dividend payout ratio (%) Operating performance Gross margin (%) Operating margin (%) EBITDA margin (%) Net margin (%) D/E (incl. minor) (x) Net D/E (incl. minor) (x) Interest coverage - EBIT (x) Interest coverage - EBITDA (x) ROA - using norm profit (%) ROE - using norm profit (%) DuPont ROE - using after tax profit (%) asset turnover (x) operating margin (%) leverage (x) interest burden (%) tax burden (%) WACC (%) ROIC (%) NOPAT (Bt m) 1,903 3,019 3,707 4,376 4,843 THANACHART SECURITIES DAIWA CAPITAL MARKETS 8

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If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word Positive, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word Negative, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word Unchanged, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An Overweight sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by THANACHART SECURITIES DAIWA CAPITAL MARKETS 11

12 DISCLAIMER MINT KALVALEE THONGSOMAUNG market cap. Underweight is used when Thanachart has SELLs on majority of the stocks it covers by market cap. Neutral is used when there are relatively equal weightings of BUYs and SELLs]. Ownership of Securities For Ownership of Securities information, please visit BlueMatrix disclosure Link at Investment Banking Relationships For Investment Banking Relationship, please visit BlueMatrix disclosure Link at Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. TNS market making TNS may from time to time make a market in securities covered by this research. Additional information may be available upon request. Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items. In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction. In some cases, we may also charge a maximum of 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan. For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements. There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements. There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us. Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. * The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc. When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Investment Advisers Association Type II Financial Instruments Firms Association Thanachart Securities Pcl. Research Team 28 Floor, Siam Tower Unit A1 989 Rama 1, Pathumwan Road, Bangkok 10330, Thailand Tel: research@thanachartsec.co.th Pimpaka Nichgaroon, CFA Head of Research Economics & Strategy pimpaka.nic@thanachartsec.co.th Sarachada Sornsong Banks, Telecom sarachada.sor@thanachartsec.co.th Phannarai Tiyapittayarut Property, Retail phannarai.von@thanachartsec.co.th Supanna Suwankird Energy, Utilities supanna.suw@thanachartsec.co.th Saksid Phadthananarak Construction, Transportation saksid.pha@thanachartsec.co.th Kalvalee Thongsomaung Food, Hotel, Media kalvalee.tho@thanachartsec.co.th Siriporn Arunothai Ad Hoc Research, Healthcare siriporn.aru@thanachartsec.co.th Noppadol Pririyawut Senior Technical Analyst noppadol.pri@thanachartsec.co.th Adisak Phupiphathirungul, CFA Retail Market Strategy adisak.phu@thanachartsec.co.th THANACHART SECURITIES DAIWA CAPITAL MARKETS 12