Analyst Expects MINT to Benefit from Covid-19 Vaccine Progress in 4Q, Giving a TP at ฿32

KGI Securities gives “Outperform” rating on Minor International Public Company Limited (MINT) with a target price of ฿32.00/share due to the progress on a COVID-19 vaccine in late 4Q20F.

 

KGI expected MINT to report a 3Q20F net loss of Bt6.0bn, improving from a net loss of Bt8.4bn in 2Q20. With ongoing Thai protests in 2020 as well as the second wave of COVID-19 outbreak in European countries, MINT’s pace of earnings recovery in 4Q20F is expected to be negatively affected. However, in the longer term, KGI reiterated the rating of Outperform on the back of progress on a COVID-19 vaccine in late 4Q20F and as the short-term recovery hiccups should not yield a significant impact on the longer-term earnings momentum. 

 

The recovery in both hotel and restaurant business is expected to be seen after several countries lifted lockdowns in 2Q20 resulting in: i) expected RevPar growth of -72% YoY in 3Q20 (vs -95% YoY in 2Q20), ii) SSSG of -12% YoY (vs -23% YoY in 2Q20), and iii) EBIT margin improving to -37% (2Q20: -98%) as operations gradually resumed during the quarter. As of end-3Q20, hotels and restaurant outlets have resumed operations at 80% and more than 90% of the pre-COVID-19 levels.  

 

RevPar growth of MINTs owned hotel portfolio is expected to come in at -72% YoY in 3Q20F, up from -95% YoY in 2Q20. Recovery is expected to be seen across destinations after local lockdown measures were lifted during 2Q20. However, hotel operation in Europe in 3Q20 is expected to see a faster pace of recovery with RevPar growth of -68% YoY, compared with other destinations averaging at -80% YoY, as domestic tourism has played a vital role in the European tourism sector and the faster recovery of international tourist arrivals (Figure 8 and Figure 9).  

 

SSSG in 3Q20F is expected to come in at -12% YoY, contributed by i) Thailand (-13% YoY), ii) China (-1% YoY), and Australia (-17% YoY). We expect the top line of the restaurant business to drop at a lower magnitude than SSSG to Bt4.9bn (-9% YoY) due to outlet expansion of 3% YoY. Meanwhile, gross margin is expected to be sluggish at 67% (-510bps YoY, flat QoQ) in 3Q20F as competition has remained high.

 

Against the backdrop of the 2020 Thai protests as well as the second wave of COVID-19 in European countries, MINT’s pace of earnings recovery in 4Q20 should be affected triggering additional downside risk to our 2020F earnings forecast. However, we reiterate a rating of Outperform on the back of progress on a COVID-19 vaccine in late-4Q20F and as the short-term recovery hiccups should not yield a significant impact on longer-term earnings momentum in 2H21-2022F. Our target price is Bt32.00 based on 13.5x 2022F EV/EBITDA, or -0.5SD to its 5-year mean. Note that we have already factored in a 1-year EBITDA discount with its WACC of 8.7%.

 

KGI suggested the risk factors including political turmoil and longer-than-expected of COVID-19 outbreak.