Target price : Under Review
Recommendation : BUY
Closing Price (13 May 09) : Bt 7.20
1Q09 net profit off 46.6% YoY and 5.5% QoQ
- MINT reported a net profit drop of 46.6% YoY and 5.5% QoQ in 1Q09.
- First-quarter margins came in much lower than our full-year forecast. The cut in our 2009 margin forecast is likely.
- We rate MINT shares a 'BUY on Weakness' with price target now under review.
1Q09 net profit off 46.6% YoY and 5.5% QoQ
Thai hotelier and food franchise firm MINT generated sales of Bt4,118m in 1Q09, down 1.6% YoY but up 4.3% QoQ. Net profit for the quarter clocked in at Bt400m, or Bt0.12 a share, off 46.6% YoY and 5.5% QoQ. The sharp profit slide on a YoY basis was attributed to: (i) soft hotel business: The weeklong airport closure in Dec 2008 scared foreign tourists away from Thailand. The average hotel occupancy rate therefore fell dramatically to 58% from a year-ago level of 80% and hotel margins sank to a five-year low at 54.4%, down 7.6% YoY and 10.9% QoQ; (ii) the absence of income from residential property business; and (iii) a rise of 20.6% YoY and 11.2% QoQ in SG&A expenses to Bt2,094m, accounting for 50.9% of sales, up 9.4% YoY and 3.2% QoQ. Gross margins at the food business widened 4.2% YoY and 0.16% QoQ to 64.5%.
First-quarter margins come in much lower than our full-year forecast: Cut in 2009 margin forecast likely
Blended gross margin averaged 62.37% in 1Q09, flat YoY but down as much as 6.7% QoQ. The fall in hotel margins to a five-year low was to blame for margin contraction. First-quarter margin of 62.37% was relatively low compared to our 2009 full-year forecast of 66.7%, reflecting our higher hotel margin assumption of 65.5%. On this basis, we may likely revise our margin forecast for the year downward if tourism and hotel business have not yet recovered.
'BUY on Weakness' rating
In our view, MINT still has strong growth prospects once the tourism industry recovers. Earnings are however expected to remain subdued in the second and third quarters. On this basis, we rate MINT shares a 'BUY on Weakness' with price target now under review.
By Phillip Securities (Thailand) Plc. on May 14, 2009
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