CGS International Securities (Thailand) (CGSI) expressed an optimistic outlook on Minor International Public Company Limited (SET: MINT) as the company is expected to see strong growth from its European hotel business in the third quarter of this year.
Tourism in Europe exhibited strong continuity into the third quarter of 2024, as reported by the Instituto Nacional de Estadistica. Spain, a critical market for MINT, witnessed a 7% and 9% year-on-year increase in tourist arrivals in July and August 2024, respectively. This trend augurs well for MINT, given its significant exposure in Spain. Additionally, Italy, contributing approximately 22% to MINT’s hotel revenues in Europe and the Americas for 2Q24, also registered a notable 13% year-on-year rise in July tourist figures, according to data from CEIC. Concurrently, Thailand’s tourism sector saw a 28% year-on-year surge in tourist arrivals in 3Q24, signaling positive omens for MINT’s operations.
Despite a tepid performance owing to subdued domestic demand in the third quarter, MINT’s food business is anticipated to see an upturn. With the Thai government disbursing THB 145 billion to 14.5 million underprivileged citizens in late September 2024, a revitalization in consumer spending is expected. This should help MINT achieve a modest 3% total system sales growth and improve upon the same-store-sales growth which slightly contracted by 1% year-on-year in 3Q24.
MINT’s hospitality sector in Europe, buoyed by high tourism influx, is expected to continue demonstrating robust revenue growth. However, attention must be given to the hotel gross margins, which have shown a shrinkage from 42.4% in 2Q23 to an estimated 38.0% in 3Q24, compared to 41.5% in the same quarter last year, primarily due to escalating costs.
For 3Q24, MINT is likely to post a net profit of THB 2,488 million, marking an increase of 17% year-on-year, although it represents a 12% decline quarter-on-quarter. This would account for 82% of CGSI’s forecasted net profit for FY24, closely aligning with the performance in the previous fiscal year.
Considering these factors, CGSI reaffirms its recommendation to ‘Add’ MINT with a revised target price of THB 41, referencing a 9.5x FY26 EV/EBITDA multiple, which is still one standard deviation below the 5-year average. This valuation reflects its optimism toward MINT’s performance in FY25 and FY26, fueled by growing tourist figures and potentially lowering interest expenses. Investors should note potential risks including significant forex losses and potential downturns in European tourism.
