Global tourism is recovering from the series of coronavirus (Covid-19) outbreak with the reopening schedule varied for every country due to their severity levels of the outbreak that first occurred in early 2020 and continued to prolong until today.
Thailand has been very cautious on the reopening even though the country relies heavily on tourism. The border was opened and abruptly closed in November not long after the outbreak of a new Covid-19 omicon variant. Still, the country is now welcoming both vaccinated and unvaccinated tourists from around the world, but with different screening and quarantine measures.
Minor International Public Company Limited (SET: MINT) is one of the hotel operators in Thailand that is severely damaged from the Covid-19 impact that forced hotels to mostly shut down. However, the operations start to recover as the original Covid-19 and the deadly delta variant subsided, leaving the omicron strain for the company to combat, which has milder symptoms compared to the previous two.
Despite the slow recovering progress in Thailand, MINT’s operations in Europe are performing well due to their recovering progress that allows borders to reopen before other countries.
NH Hotel Group SA (NHH), a Spanish multinational hotel company, is one if not the biggest assets of MINT and has been performing well in 2021 and is expected to continue carrying the positive momentum into 2022 and 2023.
According to the data compiled by Refinitiv, the consensus expects NHH to report a 84% growth in revenue at EUR988 million for the operation in 2021, while the bottomline for the year is expected to improve by 54% from a net loss of EUR371 million in 2020 to EUR170 million, before returning to see EUR3.2 million of net profit in 2022.
As for MINT, the consensus for FY2021-22 expects revenue to improve 23% and 39%, respectively, before reaching the pre-Covid level in 2023 at THB119 billion. Meanwhile, the company is expected to cut down its net loss by 36% from THB21 billion in 2020 to THB13 billion in 2021. MINT should see a positive bottomline in 2023 at THB6.3 billion.
Despite net profit still in a negative area, 16 out of 19 analysts gave buy recommendations on MINT with a consensus target price at THB37.05 per share. The highest target price is THB42 from FSS International Investment Advisory (FSSIA).
FSSIA noted that the Omicron variant should have a limited impact on the hotel business as most countries’ policies are leaning toward “living with Covid”. European hotel operations should slow down in 1Q22 on the lowest tourism season, but should bounce back in 2Q-3Q22 when MINT expects RevPAR to potentially exceed the pre-Covid level. Thai hotels should recover after resuming the Test & Go scheme in Feb. Note that the OCC rate of Thai hotels improved to 36% in Dec-21 (from 25-26% in Oct to Nov) when Test &Go was first implemented in Thailand.
FSSIA believed MINT’s earnings have already passed the bottom and its operation is now in a recovery mode. Its food business and net profit turned positive in 3Q20, while FSSIA expected MINT’s hotel business’ net profit to turn positive by 3Q22.
Moreover, MINT already solved its liquidity issue after raising capital of THB9.9b and issuing perpetual bonds worth USD300m. This should be sufficient to pass this crisis. In addition, MINT recently received approval for the extension of its financial covenant testing waiver from its creditors for another two years until the end of 2022.
Lastly, FSSIA expected MINT’s core profit to return to the pre-Covid level by 2023, with a potential upside from a better EBITDA margin arising from cost-saving measures which should permanently reduce some expenses.
