Hospitality Sector Neutral Finding a Point Of Entry

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Sector Update , 1 5 January 2014

Hospitality Sector Neutral

Finding a Point Of Entry Macro �

Risks ��

Growth ��

Value ��

Valuations summary Mkt cap Mkt P FV BV ROE EV/EBITDA(X) Rec.USD m 13 - Jan- 14 (THB) '13F '14F '13F '14F '13F '13F '13F '14F '13F '14F '13F '14F 1M 3M 1Y YTD

MINT 2,671 22.0 30.0 1.1 1.2 14.9 13.6 4.9 19.6 20.4 17.9 11.2 10.6 4.5 3.9 -9 -21 3 3 BuyCENTEL 1,065 26 38.0 1.11 1.1 27.6 3.2 7.3 14.3 23.4 22.8 10.2 9.3 3.5 3.2 -19 -38 -10 -9 BuyERW 243 3.24 4.2 0.0- -0.03 n.a. n.a. 1.8 n.a. n.a. n.a. 10.1 10.6 1.8 1.8 -19 -38 -26 -4 Trading buy

Price change (%) EPS EPS GWT PE(X) PBV(X)

Source: RHB estimates

MINT hits the trough

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EV/EBITDA (x)

+1SD = 17.8x

-1SD = 12.2x

Mean = 15x

bloodshed red-shirt protest

Source: Bloomberg

CENTEL is 20% cheaper than MINT

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Source: Bloomberg

Chalie Kueyen 66 2862 9745 License No.4975 [email protected]

Political c oncern s have sparked a selloff in hotel operators , as shares of CENTEL/ERW/MINT have dived 38%-33%/-23%. So far, the hotel sector is still not that badly affected by the poli tical turmoil since international tourist arrivals to Thailand rose to a record in Dec 2013 while the hotels upcountry were able to offset the weakness in Bangkok. These troubled times present an opportunit y to buy since current valuations have hit new lows since the May 2010 upheaval. ♦ Selloff takes stocks beyond fundamentals . The hotel sector is facing

a string of negative news due to Thailand’s intensifying political tension, which has raised fears over cancellations of hotel bookings and demand disruption. CENTEL/ERW/MINT’s shares have plunged -38%/-33%/-23% (vs the SET’s ~11%). In fact, the tourism industry as a whole has not been affected that much by the political turmoil given that international tourist arrivals rose to a record in Dec 2013 despite warnings by >30 countries on traveling to Thailand as well as the violent protests since Dec 2013. Despite falling occupancy in Bangkok, the better performance from hotels upcountry somehow offset the weakness in Bangkok.

♦ Opportunities during troubled times. The market seems to be comparing the current protests with the previous protest led by the “Red shirts” in May 2010. Although the current situation is slightly better, stocks’ valuations have already dived to their lowest since the previous protest. Since the market has already priced in the worst and valuations are now -1SD below the long-term mean, any drop will be a BUY.

♦ Shutdown Bangkok implies endgame is near. We see the overwhelming response to the “shutdown Bangkok” campaign in several major Bangkok landmarks forcing the Thai Government and judiciary taking some form of action that will lead to the end-game, such as postponement of the national election and opening the door to political reform, or a military coup. Whatever the action may be, the protests should end soon.

♦ We like CENTEL the most, and MINT second. We like CENTEL for three reasons: i) cheaper valuation vs MINT given its 10x EV/EBITDA, which implies a 20% discount to MINT, ii) management quality, iii) flexibility in managing each hotel location & guest mix. Meanwhile, MINT is attractive as it is at its trough valuation of -1SD below its long-term mean, and its lowest hotel exposure in Thailand - at only 20-25% of hotel revenue. However, we see a lot of uncertainty for ERW, which has the largest exposure in Bangkok of 70%, and most of these hotels focus on the mid-scale segment which requires a high occupancy rate of 70-75% (vs the downtown hotels’ occupancy rate of only 60-65%).

Leisure & Entertainment 15 January 2014

See import ant disclosures at the end of this report 2

Table of Contents

Troubled Times a Time Of Opportunity 3

Valuations Reach Levels Of May 2010 Lows 4

Despite Heavy Selloff, Foreign Investors’ Shareholdings Unchanged 6

International Tourist Movement During 2010 Upheaval 8

Further Pullback Means It’s Time To Buy 9-11

Protest Endgame Nears 12

Appendix: 10-Year International Arrivals in Thailand 13-15

Individual Stocks

- CENTEL - Trading At Near Bottom Levels 16-19

- ERW - Earnings Volatility To Cap Rebound 20-23

- MINT - Trading At Trough Valuation 24-27



Troubled Times a Time Of Opportunity The hotel sector is surrounded by a string of negative news from rising political tension, which raises fears of hotel bookings being cancelled and future demand growth being disrupted. The performance of individual hotels is also reflecting the situation. CENTEL, for instance, have tumbled the most, as its share price has sunk 38% over three months, while ERW shares have fallen 33% and MINT has declined 23% (vs the SET’s 11% drop.

Figure 1: 2-month share performance

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Source: Stock Exchange of Thailand,

With episodes of previous political turmoil (in 2008, the airport closure, and 2010’s red-shirt protest), the current political unrest has given rise to concerns that the tourism/hotel sector may suffer a similar fate. In the previous upheaval in May 2010, hotel occupancy in downtown hotels sank to as low as 30% (from 75% in pre-protest period). Since the current political turmoil erupted in November 2013, hotel occupancy rates in Bangkok in December plummeted to 60% (vs 83% in November). However, the hotels located upcountry chalked up better occupancy rates. Hence, we view that the current situation as slightly better than in previous episodes of political uncertainty.

What is in the price? Current valuations of -1SD below mean is the same as during 2010 protest As share prices retreat, the valuations of each hotel operator have shrunk. MINT’s and ERW’s share prices are trading at 12x EV/EBITDA - or -1 SD below their long term mean - while CENTEL’s share price is around 10x and approaching -1 SD. Current valuations are at the same levels as during 2010’s red-shirt protest where protesters occupied downtown for almost two months and about 100 people died. At these levels, we are of the view that the market has already priced in the deterioration of the political situation and the accompanying damage caused. Thus, as current valuations have reached record low, any positive news may lead to a strong turnaround in the hotel sector. This is particularly so for CENTEL, whose current 10x EV/EBITDA is at a 25% discount to MINT’s.



Trailing EV/EBITDA Suggests Undemanding Valuations

Figure 3: MINT’s EV/EBITDA is below mean

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15

20

25

EV/EBITDA (x)

+1SD = 17.8x

-1SD = 12.2x

Mean = 15x


Source: Bloomberg, RHB estimates

Figure 4: CENTEL is trading at below mean and lowest among peers

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Mean = 11x

-1SD = 8x

+1SD = 14x


Source: Bloomberg, RHB estimates

Figure 2: ERW is reaching -1SD below L-T mean, but no t compelling given the huge earnings risk for FY14

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Mean = 14.6x

-1SD = 12.1x

+1SD = 17.1x


Source: Bloomberg, RHB Research

♦ MINT’s EV/EBITDA is trading at 12x, at -1SD below mean. This is the same level as that in the 2010 red-shirt protest that led to bloodshed

♦ Although CENTEL’s EV/EBITDA is at around mean, its forward valuation of 9X offers good value given that its current P/BV is around 25% below MINT’s and below the level during the 2010 red-shirt protest.

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♦ ERW’s EV/EBITDA is also trading at below the valuation in 2010, but FY14 earnings will still be high and the stock should trade at a discount



Trailing P/BVs Also Undemanding

Figure 3: MINT

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Source: Stock Exchange of Thailand, RHB estimate

Figure 4: CENTEL

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Figure 5: ERW

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♦ MINT’s P/BV is now below its long-term mean

♦ CENTEL’s P/BV has pulled back from a high level and is still +1 SD above its long-term P/BV mean

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♦ ERW’s P/BV is at around mean



Foreign Holdings Relatively Unchanged Despite 3-Mon th Selloff

Figure 7: MINT (share price vs foreign holdings)

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MINT's share price

% foreign holding share price (THB)

-29% from peak


Figure 8: CENTEL (share price vs foreign holdings)

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CENTEL's share price


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Figure 6: ERW (share price vs foreign holdings)

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ERW's foreign holding

ERW's share price


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Source: Stock Exchange of Thailand

♦ Although shares have retreated by about 29% from the peak in Oct 2013, foreign holding has fallen by only 1%, with the current foreign shareholding at 32.7%

♦ Although CENTEL shares have plunged 42% from their peak in Oct 2013, foreign holdings fell by only <1%, with the foreign shareholding remaining at 9%

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♦ The share price has plummeted 41% from its Oct 2013 peak, but foreign shareholding has increased by almost 1.5% to 13.8%



Since the political turmoil began in Nov 2013, the heavy selling on hotel operators has accelerated as future growth expectations took a beating. After the selloff in recent months, foreign ownership in each hotel has declined slightly - by around -1% for CENTEL, and 1.3% for MINT, but increased by 1.5% for ERW.

There are pros and cons from relatively unchanged foreign shareholdings in Thailand’s hotel sector. The sector has outperformed the SET Index since 2012, buoyed by strong international tourist arrivals growth, particular of Asian tourists. To assess the sector’s outlook, we look at its future prospects going forward. At these levels, we believe that a decline in occupancy rates in Bangkok would be a short term pullback and that the industry may bounce back strongly when the turmoil ends.



International tourist movement during 2010 upheaval

During the 2010 political upheaval, the protest that started in March 2010 ended with violence that led to with around 100 deaths in mid-May that year. International tourist arrivals to Thailand moved along the same direction, starting to decline in Mar 2010 and diving in May 2013, with absolute tourist arrivals of around 826,610 people from all countries, down from 1.4m prior to the protest.

Figure 7: Monthly international tourist in past c risis: down 3 months and taking 3 months to recover

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It took international tourist arrivals to Thailand around three months to recover to normal levels. The recovery was led by Asian countries, Australia (Oceania), and Russia. In Asia, China is the largest contributor - at 18% of all international tourists, followed by Malaysia (11%), Japan (6%), and Russia (6.5%).

Figure 8: Number of international tourists by regio n – Asia at 60% of total in 2013 vs 51% in 2010

Figure 9: …all regions down during turmoil

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Source: RHB estimates Source: Ministry of Tourism and Sport, RHB estimates

Current situation may be better as Dec 2013 interna tional tourist arrivals hit new record However, the current situation is different. The number of international tourists to Thailand remained solid in Dec 2013 despite the violence and travel alerts by about 30 countries since Nov 2013. International tourist arrivals rose to a record high in Dec 2013 of 2.6m (+8% m-o-m, +9% y-o-y), with the full-year number at 26.7m (+20%). In Dec 2013, the major market feeders were Russian (+32% m-o-m), UK (+20% m-o-m), Singapore (+19% m-o-m), Malaysia (+17% m-o-m), and Germany (+16% m-o-m) – whose main destinations were not Bangkok.



Despite 3-month decline in Chinese arrivals, inter national arrivals still healthy. Since the Chinese Government implemented new legislation to protect outbound tourists from being lured by illegal travel agencies that offer zero rate package tours in Oct 2013 and the violence in Dec 2013, international tourists from China have declined from the Sept 2013 peak of 471,000 people to only 294,000 in that year (or -37% from peak, -17% m-o-m in Dec 2013). The trend was the same for arrivals from Hong Kong.

Figure 13: Monthly international tourist arrivals during past crisis – down for 3 months and taking 3 months to recover

Unit: ‘000 Sep-13 Oct-13 Nov-13 Dec-13 % chg m-o- m % chg y-o-y 12M12 12M13 % chg Asia 1,383 1,231 1,400 1,368 -2% 7% 12,180 16,091 32% EU 339 461 615 809 32% 14% 5,578 6,308 13% Oceania 249 265 256 271 6% 3% 2,887 3,003 4% US 71 95 113 129 14% 10% 1,063 1,171 10% Others 13 13 16 21 35% 19% 168 164 -2% Total 2,056 2,066 2,399 2,598 8% 9% 22,353 26,735 20% By country - Malaysia 217 241 277 324 17% 5% 2,501 2,996 20% - China 471 309 355 294 -17% 1% 2,688 4,705 75% - Russia 73 138 197 261 32% 27% 1,270 1,737 37% - Japan 136 115 135 136 1% 2% 1,358 1,538 13% - Korea 97 110 120 120 0% -1% 1,169 1,297 11% - Singapore 74 75 93 112 19% 5% 805 936 16% - UK 59 70 83 99 20% 5% 873 906 4% - India 79 80 89 91 2% -4% 1,004 1,050 5% - German 48 55 74 86 16% 8% 673 744 11% - Australia 77 87 82 89 8% 4% 916 908 -1% - HK 48 47 46 31 -32% -25% 467 582 24% Total top ten 1,379 1,327 1,552 1,642 6% 5% 13,726 17,400 27% Top 10 country/total 67% 64% 65% 63% 61% 65%


Hotel occupancy in Bangkok down but other locations upcountry stronger We can say that current political turmoil has basically affected only hotels in Bangkok, while hotels located upcountry still saw solid demand while occupancy remained at >70%. In particular, occupancy in the hotels in the northern parts of Thailand set a new record in 4Q13 that beat even the rate in 4Q12. The current situation is different from during the past crisis occupancy rates at all hotels fell and plunged at as low as 34% (vs 70% prior to the protests).

Figure 10: Hotel occupancy rates by geography

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Total Central (inc BKK) South North Northeast

Source: Bank of Thailand



Further Pullback Means It’s Time To Buy

The end is near As no one can predict the political outcome accurately nor tell when the endgame will happen, it is likely that politic confrontation may not prolong and may end soon since the intensifying demand from anti-government protesters is likely to force the government or judiciary to do something soon.

Prefer CENTEL

We like CENTEL valuation-wise and its diversified hotel portfolio, management quality, and resilient fundamentals. Its share price has retreated by the most – by -40% in 2.5 months. Its current valuation is attractive at an EV/EBITDA of around 10x, nearly -1 SD below its long-term mean, which is around a 20% discount to MINT. Furthermore, in terms of earnings sensitivity, assuming Bangkok’s hotel occupancy is sustained at 40% for two months (Jan-Feb 2014), its blended full-year occupancy rate continues to be solid at above 75% (vs 61% at breakeven). As a base-case scenario, we are assuming an occupancy rate of 78% for FY14.

Figure 11: Sensitivity of FY14 occupancy rate assumpt ion with change in BKK hotels’ occupancy ranging fr om 40-50% in 1 and 2 months

S1 - BKK hotel occ 40% S2 - BKK hotel occ 50%

Hotal rev. Occ rate 1 months 2 months 1 months 2 months

contri- assumption prolong prolong prolong prol ong

bution 40% 40% 50% 50%

BKK 33% varying 72.1% 69.2% 72.9% 70.8%

Upcountry 50% 78% 78.0% 78.0% 78.0% 78.0%

Maldives 17% 80% 80.0% 80.0% 80.0% 80.0%

Blended occ FY14 76.0% 75.1% 76.3% 75.6%


In terms of RevPar growth, we are assuming average revenue per room (RevPar) will tick up by only 0.7%, and flat average room rates for hotels in Bangkok and occupancy of 75%. However, we assume a better RevPar for upcountry hotels as we believe that a sustained high occupancy of 80% will allow the company to increase room rates, which is the same rationale for room rates growth of hotels in Maldives.

Figure 12: FY14 ARR assumption, flat in BKK, +5% upc ountry, +7% Maldives

ARR: THB/day 2012 2013 2014F Assumption

BKK 3,015 3,105 3,100 no growth as BKK drag

Upcountry 4,049 3,860 4,053 high occ command ARR +5%

Maldives 11,669 15,597 16,688 high occ command ARR +7%

Blended ARR 3,744 4,360 4,420 1.30%

ARR growth 10.0% 16.40% 1.30%


♦ Occupancy rate of >80% in upcountry and Maldives allows the company to increase room rates

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Figure 13: FY14 RevPar assumption (+1%); -3% in BKK, +1% upcountry, +2% Maldives

THB/day RevPar FY14 Occ rate

2012 2013 2014 growth assumption

BKK 2,070 2400 2325 -3.10% 75%

Upcountry 2,851 3121 3161 1.20% 78%

Maldives 8,685 13092 13331 1.90% 80%

Blended RevPar 2,617 3,489 3,510 0.70% RevPar growth 12.5% 33.3% 0.7%


… MINT comes a close second

MINT’s hotel portfolio is more diversified than others given that its hotel in Bangkok contributes only 15% of total hotel revenue, while its upcountry hotels contribute a small 10% and its overseas hotels make up the largest portion of around 75%. Among its hotels overseas, Oak Hotel represents two-thirds of revenue while the rest is diversified over several countries - China, Vietnam, Africa, Maldives. Thus, its hotel revenue has been the least impacted by political turmoil. Valuation-wise, the stock is trading at an EV/EBITDA of 12x - or -1SD below its long-term valuation mean (20% premium compared with CENTEL).

Figure 14: Hotel guest Figure 19: Hotel revenue by location

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ERW too reliant on Bangkok hotels ERW is a hotel pure play that differs from CENTEL and MINT in that its hotel business represents about half of its operating profit, and its hotel revenue is highly dependent on its Bangkok hotels. That said, the stock’s valuation is not compelling enough – at an EV/EBITDA of 12x (or a 20% premium to CENTEL).

♦ Lower occupancy rates in BKK in FY14 will force down the group’s RevPar to only +0.7%

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Response to “Shutdown Bangkok” May Bring About The End

The end is near

On the first day of the “shutdown Bangkok’’ campaign, an overwhelmingly huge crowd joined the protest in several key city landmarks - MBK intersection, CTW Tower/Ratchprasong intersection, Sukhumvit intersection, and Victory Monument. The sheer number of people joining the protest is likely to give rise to further developments such as negotiations, a military coup, or a civilian clash. Whatever the outcome, this may mean the end is near.

Figure 15: MBK Figure 16: CTW

Source: Manager Newspaper Source: Manager Newspaper

Figure 22: Sukhumvit-Asoke intersection Figure 23 : Victory monument

Source: Manager Newspaper Source: RHB Research



Appendix

Figure 24: Top 10 markets for tourist arrivals to Thailand in the past 10 years 2005 2006 2007 2008 2009 2010 2011 2012 2013 CAGR

'05-'13By country (million) - Malaysia 1.37 1.59 1.54 1.81 1.76 2.06 2.50 2.55 3.00 11.8% - China 0.78 0.95 0.91 0.83 0.78 1.12 1.72 2.79 4.71 29.3% - Russia 0.10 0.19 0.28 0.32 0.34 0.64 1.05 1.32 1.74 49.8% - Japan 1.20 1.31 1.28 1.15 1.00 0.99 1.13 1.37 1.54 3.6% - Korea 0.82 1.09 1.08 0.89 0.62 0.81 1.01 1.16 1.30 6.8% - India 0.38 0.46 0.54 0.54 0.61 0.76 0.91 1.01 1.05 15.6% - Singapore 0.65 0.69 0.60 0.57 0.56 0.60 0.68 0.83 0.94 5.3% - UK 0.77 0.85 0.86 0.83 0.84 0.81 0.84 0.87 0.91 2.3% - Australia 0.43 0.55 0.66 0.69 0.65 0.70 0.83 0.93 0.91 11.3% - German 0.44 0.52 0.54 0.54 0.57 0.61 0.62 0.68 0.74 7.7% - HK 0.27 0.38 0.37 0.34 0.32 0.32 0.41 0.47 0.58 11.3%Total top ten 7.22 8.57 8.66 8.51 8.05 9.42 11.71 14.00 17.40 13.4%Total top ten 63% 62% 60% 58% 57% 59% 61% 63% 65%

By % - Malaysia 11.88 11.51 10.65 13.74 12.42 12.92 13.00 11.48 11.21 - China 6.72 6.87 6.27 5.67 5.49 7.04 8.95 12.51 17.60 - Russia 0.89 1.36 1.92 1.09 2.38 4.05 5.48 5.91 6.50 - Japan 10.35 9.49 8.83 8.68 7.10 6.24 5.87 6.15 5.75 - Korea 7.06 7.91 7.49 7.10 4.37 5.05 5.23 5.24 4.85 - India 3.30 3.33 3.71 3.71 4.34 4.77 4.76 4.55 3.93 - Singapore 5.62 4.97 4.18 3.56 3.98 3.79 3.55 3.68 3.50 - UK 6.69 6.15 5.94 5.01 5.95 5.09 4.39 3.90 3.39 - Australia 3.70 3.98 4.55 4.70 4.57 4.38 4.32 4.17 3.40 - German 3.82 3.74 3.76 2.70 4.05 3.81 3.22 3.06 2.78 - HK 2.37 2.72 2.54 3.39 2.25 1.99 2.14 2.12 2.18 Total top ten 62 62 60 59 57 59 61 63 65

Growth by country - Malaysia -2.2% 15.8% -3.2% 17.2% -2.6% 17.1% 21.4% 2.2% 17.3% - China 6.4% 22.2% -4.4% -8.9% -5.9% 44.3% 53.4% 61.9% 68.8% - Russia -30.1% 82.6% 47.9% 16.8% 4.0% 91.3% 63.5% 24.9% 31.9% - Japan -1.3% 9.6% -2.6% -9.7% -12.9% -1.1% 13.5% 21.8% 12.0% - Korea -9.2% 33.9% -0.8% -17.9% -30.5% 30.3% 24.9% 15.6% 11.5% - India 14.8% 20.5% 16.7% 0.1% 14.5% 23.7% 20.3% 10.7% 3.6% - Singapore 12.5% 5.6% -12.0% -5.7% -1.1% 7.1% 13.1% 21.8% 12.7% - UK 2.2% 9.9% 1.0% -3.8% 1.8% -3.6% 4.2% 3.3% 3.8% - German -2.9% 16.9% 5.4% -0.3% 5.7% 5.8% 2.0% 10.2% 9.1% - Australia 7.3% 28.2% 19.8% 5.5% -6.9% 7.9% 18.9% 12.1% -2.4% - HK -43.9% 37.3% -2.3% -8.2% -5.6% -0.7% 30.1% 15.0% 22.8%Total top ten -2.5% 18.8% 1.0% -1.7% -5.3% 17.0% 24.3% 19. 5% 24.3%Grand total -1.1% 20.0% 4.6% 0.8% -3.0% 12.6% 20.7% 16.2% 1 9.6% Source: Ministry of Tourism and Sport, RHB estimates



Figure 25: Top 10 country (at 60% of Thailand’s in ternational tourists) movements during protest in 2 010

Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Top 10 international tourist arrival to Thailand (‘ 000 people)

- Malaysia 205 161 158 130 155 167 162 189 166 166 253

- China 153 74 53 36 49 90 124 101 99 112 125

- Russia 69 66 46 25 16 20 21 24 62 94 118

- Japan 107 97 72 46 52 72 94 88 73 93 98

- Korea 74 75 52 44 44 63 70 59 72 77 82

- Singapore 50 50 34 32 49 50 52 49 46 59 83

- UK 82 84 71 43 52 62 64 52 63 70 85

- India 53 55 51 62 62 61 60 65 74 73 82

- German 71 78 46 31 24 33 39 38 46 65 64

- Australia 50 56 56 40 54 62 54 62 65 55 75

- HK 40 22 16 7 23 41 43 26 23 25 27

Top 10 955 819 656 497 581 721 784 753 791 890 1,092

% top 10 to total 59.1% 56.9% 59.2% 60.2% 60.2% 56.5% 61.7% 61.9% 60.0% 60.2% 60.0%

% growth by 10 top country – deeply plunged fo r China Singapore HK during protest in Apr -May 2010

- Malaysia 73.4% 4.7% 12.6% -2.2% 12.7% 51.0% 24.2% 43.5% 15.6% 2.5% 6.8%

- China 187.6% -6.4% -24.5% -1.6% 38.8% 88.0% 94.0% 56.7% 19.1% 20.4% 33.4%

- Russia 106.7% 99.2% 108.8% 135.7% 60.7% 54.3% 31.4% 38.3% 80.8% 81.6% 121.3%

- Japan 26.9% 14.8% -7.1% -24.2% -11.0% -9.9% -9.3% -17.7% -12.8% 5.9% 4.5%

- Korea 28.2% 51.2% 15.1% 3.6% 3.8% 7.4% 7.3% 107.8% 86.2% 48.3% 1.9%

- Singapore 48.1% 17.1% -7.5% -10.8% -6.4% 41.5% 24.7% 9.7% -3.1% -9.3% -9.4%

- UK 16.6% 15.3% -5.0% -18.5% -6.7% -9.6% -9.1% -9.9% -11.4% -8.7% -8.8%

- India 49.7% 32.3% 12.4% -11.6% 4.1% 29.1% 23.5% 31.6% 28.1% 39.9% 21.0%

- German 25.3% 31.6% 1.8% -2.7% -7.6% 3.3% -4.7% -7.1% -2.7% -2.4% -5.6%

- Australia 19.7% 26.9% 6.3% -9.5% 5.9% 6.2% 6.1% 7.6% -0.3% -0.4% 4.3%

- HK 118.8% -19.6% -29.5% -55.9% -3.4% 28.7% 17.8% -6.2% -25.3% -8.2% -18.0%

Total top ten 58.2% 18.9% 3.6% -7.1% 5.1% 23.6% 17.2% 20.1% 12.2% 12.6% 11.0%




Figure 17 International tourist arrival to Thailan d at record high in Dec-13

% chg

Sep-13 Oct-13 Nov-13 Dec-13 m-o-m y-o-y 12M12 12M13 % chg Asia 1,383 1,231 1,400 1,368 -2% 7% 12,180 16,091 32% EU 339 461 615 809 32% 14% 5,578 6,308 13% Oceania 249 265 256 271 6% 3% 2,887 3,003 4% US 71 95 113 129 14% 10% 1,063 1,171 10% Others 13 13 16 21 35% 19% 168 164 -2% Total 2,056 2,066 2,399 2,598 8% 9% 22,353 26,735 20% By country - Malaysia 217 241 277 324 17% 5% 2,501 2,996 20% - China 471 309 355 294 -17% 1% 2,688 4,705 75% - Russia 73 138 197 261 32% 27% 1,270 1,737 37% - Japan 136 115 135 136 1% 2% 1,358 1,538 13% - Korea 97 110 120 120 0% -1% 1,169 1,297 11% - Singapore 74 75 93 112 19% 5% 805 936 16% - UK 59 70 83 99 20% 5% 873 906 4% - India 79 80 89 91 2% -4% 1,004 1,050 5% - German 48 55 74 86 16% 8% 673 744 11% - Australia 77 87 82 89 8% 4% 916 908 -1% - HK 48 47 46 31 -32% -25% 467 582 24% Total top ten 1,379 1,327 1,552 1,642 6% 5% 13,726 17,400 27% Top 10 country/total 67% 64% 65% 63% 61% 65%




Central Plaza Hotel (CENTEL TB) Buy (Maintained)

Consumer Cyclical - Leisure & Entertainment Target Price: THB38.0Market Cap: USD1,062m Price: THB26.0

Trading At Near Bottom Levels Macro ��

Risks ��

Growth �

Value ��

86

98

110

122

134

146

22

27

32

37

42

47

Central Plaza Hotel (CENTEL TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

2

4

6

8

10

12

14

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep

-13

No

v-13

Vol

m

Source: Bloomberg

Avg Turnover (THB/USD) 83.3m/2.56m

Cons. Upside (%) 53.1

Upside (%) 53.8

52-wk Price low/high (THB) 24.1 - 42.8

Free float (%) 45

Shareholders (%)

Chirathivat Family 64%

Local Investors 28%

Shariah compliant

Chalie K ueyen 66 2862 9745 License No.4975 [email protected]

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-1 3F Dec-14FTotal turnover (THBm) 9,500 11,574 15,381 16,705 18,249Reported net profit (THBm) (10) 591 1,623 1,492 1,540Recurring net profit (THBm) (10) 591 1,165 1,492 1,540Recurring net profit growth (%) n.a. 5966 97 28 3.2Recurring EPS (THB) (0.01) 0.44 0.86 1.11 1.14Recurring P/E (x) n.a. 22.9 21.6 21.7 21.9P/B (x) 5.61 5.61 3.47 3.18 3.01P/CF (x) 4.2 6.0 11.4 9.6 9.5EV/EBITDA (x) 9.1 9.7 12.8 11.2 10.8Return on average equity (%) (0.2) 10.2 21.4 15.3 14.4Net debt to equity (%) 159 168 126 110 89Our vs consensus EPS (%) 3.8 (8.4)

Source: Company data, RHB estimates

While we turn cautious on the tourism sector, CENTEL’ s share price – down ~40% in the last two months – implies that it is trading at near bottom. Despite the heavy selloff, we believe there will be insignificant change in its fundamentals, assuming occupancy at its Bangkok hotels will be sustained at low 40% levels in Jan-Feb 2014 – protest months. I n a worst-case scenario, we project RevPAR 0.7% growth . ♦ Solid 4Q13 despite poor performance from Bangkok hot els .

Although around 26 countries issued travel warnings for Bangkok at end-Nov 2013, CENTEL’s hotel operations did not fare too badly in 4Q13. Its hotel occupancy rates in Bangkok declined substantially to 60% in Dec 2013 (Nov 2013: 83%), while revenue per available room (RevPAR) fell 26% m-o-m. However, higher occupancy rates and RevPAR from its upcountry and Maldives hotels helped to offset the weak performance in Bangkok. All in, CENTEL’s blended occupancy rate fell slightly to 78% in 4Q13 (3Q13: 80%), but RevPAR improved by 32% y-o-y and 16% q-o-q. Note that its Bangkok, upcountry and Maldives hotels account for 33%, 48% and 18% of the group’s hotel revenue respectively.

♦ Cutting FY14 earnings and TP by 13%. The hotel business typically peaks in the 1Q (February, in particular) and 1Q earnings normally represent around 35% of full-year earnings. Assuming an occupancy rate of 70% (vs a breakeven point of 60%) and RevPAR of THB3,300 (-12% q-o-q; -21% y-o-y) vs a breakeven point of THB2,600 in 1Q14, we cut our FY14 earnings and TP by 13%.

♦ Still a BUY. We like CENTEL for its valuation, diversified hotel portfolio, quality of management and resilient fundamentals. Its share price has declined by 40% in two-and-a-half months and its current valuation is attractive – with an EV/EBITDA of around 10x, or nearly -1SD below its long-term mean. This is a c.20% discount to Minor International (MINT TB, BUY, TP: THB30) valuation. Furthermore, in our earnings sensitivity test, even when we assume that the 40% occupancy rate for CENTEL’s Bangkok hotels will be sustained for two months (Jan-Feb 2014), its blended full-year occupancy rate continues to be solid at >75% vs the breakeven point of 61%. As a base-case scenario, we assume its occupancy rate at 78% in FY14.



Financial Exhibits

Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec -14F

Total turnover 9,500 11,574 15,381 16,705 18,249

Cost of sales (4,230) (5,124) (8,670) (8,248) (9,090)

Gross profit 5,270 6,450 6,711 8,457 9,158

Gen & admin expenses (2,330) (2,763) (3,833) (4,176) (4,699)

Selling expenses (2,422) (2,506) (615) (1,792) (1,521)

Operating profit 518 1,182 2,263 2,489 2,938

Operating EBITDA 1,748 2,316 3,614 3,889 4,358

Depreciation of fixed assets (1,230) (1,135) (1,351) (1,400) (1,420)

Operating EBIT 518 1,182 2,263 2,489 2,938

Net income from investments - 78 59 - -

Interest expense (308) (414) (486) (510) (500)

Pre-tax profit 211 846 1,836 1,979 2,438

Taxation (220) (255) (213) (487) (683)

Profit after tax & minorities (10) 591 1,623 1,492 1,756

Reported net profit (10) 591 1,623 1,492 1,756

Recurring net profit (10) 605 1,170 1,492 1,756


Cash flow (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Operating profit 518 1,182 2,263 2,489 2,938

Depreciation & amortisation 1,230 1,135 1,351 1,400 1,420

Change in working capital 135 156 (124) (1) 102

Other operating cash flow 359 482 (123)

Operating cash flow 2,241 2,954 3,368 3,888 4,460

Interest paid (308) (414) (486) (510) (500)

Tax paid (139) (235) (257) (463) (649)

Cash flow from operations 1,795 2,306 2,624 2,916 3,312

Capex (2,222) (1,385) (1,255) (1,266) (650)

Other investing cash flow 7 (758) (756) (438) (400)

Cash flow from investing activities (2,215) (2,143) (2,011) (1,704) (1,050)

Dividends paid (80) (81) (213) (400) (418)

Increase in debt (1,138) 811 1,812 (1,100) (500)

Other financing cash flow 2,018 (723) (2,230) 490 (500)

Cash flow from financing activities 799 7 (631) (1,010) (1,418)

Cash at beginning of period 115 299 316 356 498

Total cash generated 379 170 (18) 202 844

Forex effects (195) (153) 58 (60)

Implied cash at end of period 299 316 356 498 1,342




Financial Exhibits

Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec -14F

Total cash and equivalents 299 316 356 498 1,149

Inventories 305 400 473 495 545

Accounts receivable 277 556 836 902 985

Other current assets 745 488 323 320 320

Total current assets 1,626 1,760 1,989 2,215 3,000

Total investments 17,598 18,115 23,479 21,068 21,540

Tangible fixed assets 223 656 634 800 800

Intangible assets 1,242 1,152 1,656 4,500 4,440

Total non-current assets 19,063 19,924 25,768 26,368 26,780

Total assets 20,688 21,683 27,757 28,583 29,780

Short-term debt 3,012 3,925 4,957 3,957 4,715

Accounts payable 467 1,541 1,851 2,088 2,281

Other current liabilities 1,618 925 753 820 820

Total current liabilities 5,097 6,391 7,561 6,865 7,816

Total long-term debt 6,224 5,917 6,942 7,442 5,942

Other liabilities 3,286 3,327 3,195 3,398 3,891

Total non-current liabilities 9,510 9,244 10,137 10,841 9,833

Total liabilities 14,607 15,635 17,698 17,706 17,650

Share capital 1,350 1,350 1,350 1,350 1,350

Retained earnings reserve 1,617 1,927 3,306 4,998 6,231

Other reserves 2,831 2,518 4,722 3,829 3,829

Shareholders' equity 5,798 5,796 9,377 10,177 11,410

Minority interests 284 253 682 700 720

Total equity 6,082 6,048 10,059 10,877 12,130

Total liabilities & equity 20,688 21,683 27,757 28,583 29,780


Key Ratios (THB) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Revenue growth (%) 11.3 21.8 32.9 8.6 9.2

Operating profit growth (%) 56.8 128.1 91.5 10.0 18.1

Net profit growth (%) (109.9) 0.0 174.8 (8.1) 17.7

EPS growth (%) (109.9) 0.0 174.8 (8.1) 17.7

Bv per share growth (%) (2.8) (0.0) 61.8 8.5 12.1

Operating margin (%) 5.5 10.2 14.7 14.9 16.1

Net profit margin (%) (0.1) 5.1 10.6 8.9 9.6

Return on average assets (%) (0.0) 2.8 6.6 5.3 6.0

Return on average equity (%) (0.2) 10.2 21.4 15.3 16.3

Net debt to equity (%) 146.9 157.5 114.8 100.2 78.4

Recurrent cash flow per share 1.33 1.71 1.94 2.16 2.45




SWOT Analysis

• Diversified market segments, namely the hotel and food businesses

• Strong brand name in the mid to luxury hotel segment

• Quality management

• Rising competition in the budget hotel market

• Lower domestic consumption results in slower same-store sales

• Expansion into the budget hotel business

• Overseas expansion via hotel management contracts

• Expansion of its food business upcountry

• Earnings volatility due to seasonal factors in the tourism sector

-1,000%

-400%

200%

800%

1,400%

2,000%

2,600%

3,200%

3,800%

4,400%

5,000%

0

20

40

60

80

100

120

140

160

180

200

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

-5%

-1%

4%

8%

12%

16%

21%

25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

Source: Company data, RHB estimates Source: Company data, RHB estimates

Company Profile Central Plaza Hotel (CENTEL) operates and manages a chain of hotels and resorts. It is also a pioneer in quick service restaurants (QSR) in Thailand.



Erawan Group (ERW TB) Neutral (from Buy)

Consumer Cyclical - Leisure & Entertainment Target Price: THB4.20Market Cap: USD243m Price: THB3.24

Earnings Volatility To Cap Rebound Macro ��

Risks ��

Growth �

Value �

70

79

88

96

105

114

123

131

140

2.7

3.2

3.7

4.2

4.7

5.2

5.7

6.2

6.7

The Erawan Group (ERW TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

50

100

150

200

250

300

350

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep

-13

No

v-13

Vol

m

Source: Bloomberg

Avg Turnover (THB/USD) 41.7m/1.32m


Upside (%) 29.6


Free float (%) 30

Shareholders (%)

Vongkusolkit Group 36.3

Wattanavekin Group 33.0

Shariah compliant


Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-1 3F Dec-14F

Total turnover (THBm) 3,321 3,756 4,302 4,746 4,566

Reported net profit (THBm) (275) 491 106 610 (78)

Recurring net profit (THBm) (275) (112) 106 (22) (78)

Recurring net profit growth (%) 19.9 (59.2) na (120.6) 256.5

Recurring EPS (THB) (0.12) (0.05) 0.05 (0.01) (0.03)

Recurring P/E (x) na na 68.7 na na

P/B (x) 2.32 2.03 2.07 1.94 1.96

Return on average equity (%) (8.4) 14.6 3.0 16.0 (1.9)

Return on average assets (%) (2.1) 3.9 0.8 4.8 (0.6)


Our vs consensus EPS (%) (33.8) (115.6)


Although ERW’s 12x EV/EBITDA is around -1SD below long -term mean, we believe its higher earnings volatility will make its share price less attractive than its peers’. We project ERW’s FY14 occ upancy rate at a low level of 72%, which is below the breakeven leve l and implies a net profit loss. We slash our target price to THB4.20 from THB6.50 (EV/EBITDA 15x). Downgrade to NEUTRAL (from Buy).

♦ Cutting FY14 earnings from profit to loss. We believe the political

tension will hit ERW the hardest given that it is a pure hotel play, with around 70% of revenue derived from its Bangkok operation. In addition, ERW’s hotel portfolio mostly focuses on the mid-scale segment, which requires a high occupancy rate of 70-75% to break even. We expect hotel occupancy rate in Bangkok to hover around 50-60% in 1Q14 and to recover to 80% on average from 2Q14 onwards. Thus, its FY14 occupancy rate is estimated at around 72%, with revenue per available room (RevPar) growing by 1%. This implies an operating loss of THB78m for FY14 (from a THB20m profit previously). As a result, we cut our target price to THB4.20 (down from THB6.50).

♦ Expect slow recovery. Historically, hotels are able to return to profit 2-3 months after the crisis. For ERW, the recovery will take a bit longer as it needs to fill up occupancy rate up to 70-75% to break even, vs CENTEL and MINT which require a lower occupancy rate of around 60% to break even. Thus, we expect ERW to put in more efforts to drive up its occupancy rate eg using price cut as part of its turnaround attempts. This should imply margin compression in the early recovery phase.

♦ Earnings growth to slow. ERW’s earnings growth has been impressive over the past three consecutive quarters with an average EBITDA growth of 81% in 9M13, which has given a boost to its share price. However, we expect the current political unrest to affect earnings growth from 4Q13 onwards amid a lower occupancy rate and room rate. We project 4Q13 EBITDA at THB270m (flat q-o-q, but +57% y-o-y). Key catalyst to revert to a Buy call for ERW will depend on the recovery of its hotel occupancy rate and RevPar growth to above the breakeven level.



Financial Exhibits


Total turnover 3,321 3,756 4,302 4,746 4,566

Cost of sales (2,327) (2,435) (2,607) (3,044) (2,994)

Gross profit 994 1,320 1,695 1,702 1,573

Gen & admin expenses (702) (811) (873) (1,092) (1,050)

Selling expenses (214) (251) (261) (332) (320)

Operating profit 78 259 561 278 203

Operating EBITDA 762 904 1,202 1,031 984

Depreciation of fixed assets (684) (646) (641) (753) (781)

Operating EBIT 78 259 561 278 203

Other recurring income 40 65 57 101 97

Interest expense (361) (407) (393) (336) (307)

Exchange gains 4 3 5 3 3

Exceptional income - net - 664 - 640 -

Pre-tax profit (239) 584 230 686 (5)

Taxation (20) (53) (63) (9) 1

Minority interests (16) (39) (61) (67) (74)

Profit after tax & minorities (275) 491 106 610 (78)

Reported net profit (275) 491 106 610 (78)

Recurring net profit (275) (112) 106 (22) (78)



Operating profit 78 259 561 278 203

Depreciation & amortisation 684 646 641 753 781

Change in working capital 122 (48) (58) (302) (6)

Other operating cash flow 425 532 547 739 659


Interest paid (361) (407) (393) (336) (307)

Tax paid (20) (53) (63) (9) 1

Cash flow from operations 928 928 1,235 1,123 1,332

Capex (489) (538) (1,107) (1,500) (1,500)

Other new investments (163) 1,352 (8) (83) (130)

Other investing cash flow 4 1 74 1,800 1,000

Cash flow from investing activities (648) 816 (1,040) 217 (630)

Dividends paid - - (180) (244) 31

Proceeds from issue of shares - - 2 251 30

Increase in debt 29 (1,100) 375 (1,039) (567)

Other financing cash flow (367) (414) (433) (136) 12

Cash flow from financing activities (337) (1,514) (235) (1,167) (494)

Cash at beginning of period 277 220 450 410 582

Total cash generated (57) 230 (40) 172 208

Implied cash at end of period 220 450 410 582 791




Financial Exhibits


Total cash and equivalents 220 450 410 582 221

Inventories 73 53 49 65 72

Accounts receivable 148 134 195 202 194

Other current assets 115 134 165 394 380

Total current assets 557 771 819 1,244 867

Total investments 3 3 2 6 5

Tangible fixed assets 10,256 9,598 10,226 9,286 9,109

Intangible assets 61 46 47 51 52

Total other assets 2,073 1,819 1,740 1,926 1,936


Total assets 12,949 12,238 12,834 12,513 11,969

Short-term debt 196 76 262 582 559

Accounts payable 253 257 466 430 417

Other current liabilities 922 1,113 1,292 1,310 1,287



Other liabilities 477 295 306 351 354



Share capital 2,245 2,245 2,245 2,479 2,489

Retained earnings reserve 80 115 118 149 145

Other reserves 807 1,224 1,149 1,502 1,480


Minority interests 142 181 203 270 344

Other equity (1) 4 (1) 4 4

Total equity 3,273 3,769 3,714 4,404 4,461




Revenue growth (%) 5.5 13.1 14.6 10.3 (3.8)

Operating profit growth (%) (30.5) 230.6 117.0 (50.5) (27.1)

Net profit growth (%) 19.9 0.0 (78.5) 475.8 (112.7)

EPS growth (%) 19.9 0.0 (78.5) 447.3 (112.1)

Bv per share growth (%) (8.1) 14.5 (2.0) 6.5 (0.8)


Net profit margin (%) (8.3) 13.1 2.5 12.8 (1.7)

Return on average assets (%) (2.1) 3.9 0.8 4.8 (0.6)

Return on average equity (%) (8.4) 14.6 3.0 16.0 (1.9)






SWOT Analysis

• The leading economy hotel chain in Thailand

• Diversified market exposure demographically and geographically

• Volatility in tourist arrivals

• Rising competition

• Strong exposure to the economy hotel segment

• Expanding in the mid-end and economy hotel segments

• Unlocking asset value to fund future expansion

• Asset-heavy

• Capital-intensive business model and long gestation period

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P/BV (x) vs ROAE



Company Profile The Erawan Group is a property investment company with a portfolio of 16 hotels across Thailand. It also owns a retail property in Bangkok.



Minor International (MINT TB) Buy (Maintained)

Consumer Cyclical - Leisure & Entertainment Target Price: THB30.0Market Cap: USD2,662m Price: THB22.0

Trading At Trough Valuation Macro ��

Risks ��

Growth ��

Value ��

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Minor International (MINT TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

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Source: Bloomberg

Avg Turnover (THB/USD) 197m/6.11m


Upside (%) 47.7


Free float (%) 54

Shareholders (%)

Group of Heinecke family 25.5

Nithi Osathanugrah 7.9

The King and CPB Equity 2.2

Shariah compliant


Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-1 3F Dec-14F

Total turnover (THBm) 18,140 26,137 31,310 36,635 40,748

Reported net profit (THBm) 1,312 2,927 3,410 4,319 4,905

Recurring net profit (THBm) 1,312 2,927 3,410 4,319 4,905

Recurring net profit growth (%) (12.3) 123.0 16.5 26.7 13.6

Recurring EPS (THB) 0.40 0.90 0.98 1.13 1.23

Recurring P/E (x) 55.8 25.1 23.0 20.0 18.2

P/B (x) 5.70 5.13 4.57 3.47 3.02

P/CF (x) 28.9 19.3 17.3 14.5 14.5

EV/EBITDA (x) 26.1 18.0 15.2 13.4 13.0

Return on average equity (%) 10.9 21.5 21.0 19.7 17.7


Our vs consensus EPS (%) 0.0 0.0


MINT is reaping benefits from new hotels opened in 2012-2013, with rising occupancy rate and RevPar increasing at a fas ter pace. We see strong earnings growth for FY14, backed by its diversified hotel portfolio, improving same-store sales growth (SSSG) at The Pizza Company and the breakeven in its China food operations. Hen ce, we are place MINT at the top of the BUY list for the ho spitality sector. ♦ Trough valuation 10x EV/EBITDA, at -1SD below long- term mean.

MINT’s share price pullback and trough valuation have increased its attractiveness to investors. Given minimal impact from the political unrest in Bangkok, the group is trading at a forward EV/EBITDA of 10x, or -1SD below its long-term mean. This is below the valuation levels registered during the political protests of May 2010, which saw bloodshed on the streets. Valuations at this level represent a signal to BUY.

♦ Improving occupancy rate. We think that MINT’s solid 3Q13 hotel performance makes a case for its improving occupancy rate to drive next year’s earnings growth, which is unlikely for peers Central Pattana (CENTEL TB, BUY, TP: THB38) and Erawan (ERW TB, NEUTRAL, FV: THB4.20) as they are currently running at 80% occupancy rates (MINT: 69%). Thus, we expect the group to gain better momentum in revenue per available room (RevPAR) vs CENTEL and ERW in FY14. We project full-year RevPar growth of 14% for MINT (1% CENTEL and -3% for ERW), as several new hotels opened by the group in 2012-2013 are expected to see higher occupancy rates of close to 60% in 4Q13-1Q14 during the peak season (from a low base of 45% at opening).

♦ A diversified portfolio. MINT’s hotel portfolio is more diversified than its competitors. Given its aggressive expansion outside of Thailand and increasing contributions from its mixed-use businesses, the group is less dependent on its Bangkok hotel portfolio, which accounted for 15% of 9M13 revenue (down from 25% three years ago).

♦ Better food business. While SSSG continued to fall, MINT’s outlet expansion and improving China operations have helped boost 9M13 bottomline by a solid 20% y-o-y. We expect better 4Q13 earnings as the SSSG of The Pizza Company turns positive and its food operations in China improve.



Financial Exhibits


Total turnover 18,140 26,137 31,310 35,554 39,351

Cost of sales (7,704) (11,267) (13,790) (15,591) (16,521)

Gross profit 10,436 14,869 17,520 19,963 22,830

Gen & admin expenses (9,324) (12,844) (14,315) (15,910) (17,610)

Operating profit 1,112 2,026 3,205 4,052 5,221

Operating EBITDA 2,683 4,006 5,406 6,363 7,642

Depreciation of fixed assets (1,571) (1,980) (2,201) (2,311) (2,421)

Operating EBIT 1,112 2,026 3,205 4,052 5,221

Net income from investments 217 264 446 491 565

Other recurring income 733 1,931 1,237 1,423 1,536

Interest expense (458) (879) (1,085) (1,129) (1,035)

Pre-tax profit 1,603 3,341 3,803 4,837 6,286

Taxation (291) (415) (393) (774) (1,257)

Profit after tax & minorities 1,312 2,927 3,410 4,063 5,029

Reported net profit 1,312 2,927 3,410 4,063 5,029

Recurring net profit 1,312 2,927 3,410 4,063 5,029



Operating profit 1,112 2,026 3,205 4,052 5,221

Depreciation & amortisation 1,571 1,980 2,201 2,311 2,421

Change in working capital 72 413 (930) 400 400

Other operating cash flow 657 832 1,637 346 799


Interest paid (448) (828) (1,077) (1,129) (1,035)

Tax paid (426) (610) (510) (774) (1,257)

Cash flow from operations 2,537 3,813 4,525 5,206 6,548

Capex (4,412) (3,043) (4,327) (6,000) (5,000)

Other investing cash flow (307) (3,495) (2,002) (700) (700)

Cash flow from investing activities (4,718) (6,539) (6,329) (6,700) (5,700)

Dividends paid (581) (503) (493) (853) (1,016)

Proceeds from issue of shares 95 90 916 3,374 -

Increase in debt 2,867 3,082 4,411 (2,700) (500)

Other financing cash flow (0) - - - 0

Cash flow from financing activities 2,381 2,670 4,834 (179) (1,516)

Cash at beginning of period 969 1,156 1,146 3,702 2,458

Total cash generated 200 (55) 3,030 (1,672) (668)

Implied cash at end of period 1,169 1,101 4,176 2,030 1,790




Financial Exhibits


Total cash and equivalents 1,156 1,146 3,702 2,458 2,056

Inventories 950 1,466 1,616 1,955 2,164

Accounts receivable 1,576 2,739 2,955 3,733 4,132

Other current assets 3,165 2,256 1,988 2,016 2,045

Total current assets 6,847 7,607 10,261 10,162 10,397

Total investments 3,836 4,593 4,941 5,122 5,343

Tangible fixed assets 15,138 18,104 20,397 23,028 24,807

Intangible assets 6,147 9,407 12,299 12,299 12,299

Total other assets 831 1,155 3,077 3,853 5,371


Total assets 32,799 40,865 50,975 54,463 58,217

Short-term debt 2,159 3,503 3,339 2,101 1,602

Accounts payable 2,961 3,992 4,640 5,613 5,948

Other current liabilities 938 1,091 960 708 375



Other liabilities 748 981 1,797 333 408



Share capital 3,262 3,275 3,687 3,973 3,973

Retained earnings reserve 6,338 8,728 11,315 14,555 18,598

Other reserves 3,273 2,364 3,132 6,989 6,989


Minority interests 882 567 1,213 1,334 1,468

Total equity 13,756 14,935 19,347 26,851 31,028




Revenue growth (%) 10.2 44.1 19.8 13.6 10.7

Operating profit growth (%) (20.5) 82.2 58.2 26.5 28.8

Net profit growth (%) (12.3) 123.0 16.5 19.1 23.8

EPS growth (%) (7.5) 122.1 9.4 8.3 19.3

Bv per share growth (%) 14.9 11.2 12.1 30.6 15.8


Net profit margin (%) 7.2 11.2 10.9 11.4 12.8

Return on average assets (%) 4.3 7.9 7.4 7.7 8.9

Return on average equity (%) 10.9 21.5 21.0 18.6 18.3






SWOT Analysis

• Established name in Thailand and around the region

• Great expertise in hotel management, both in Thailand and around the world

• Low take-up rates at overseas hotel under its management

• Australia’s Oak Hotel is at a mature stage, implying no room for improvement

• Healthy tourist arrivals in Thailand

• Rising number of tourists travelling across the region

• Debt level is higher than that of its peers

• Stronger THB will hurt income contributions from its international hotels

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Company Profile Minor International (MINT) is a hotel owner, operator and investor with a portfolio of over 12,000 rooms across more than 80 hotels, resorts and serviced suites under the Anantara, Marriott, Four Seasons, Elewana, Oaks and Minor International brands. It operates in 12 countries, including Thailand, the Maldives, Indonesia, the United Arab Emirates, Vietnam, Malaysia, China, Tanzania, Kenya, Sri Lanka, Australia and New Zealand. In addition, its mixed-use business operates spas, shopping plazas and entertainment outlets, residential properties, and a points-based vacation club. MINT also manages a wide range of quick service restaurants, operating over 1,300 outlets in 17 countries under The Pizza Company, Swensen’s, Sizzler, Dairy Queen, Burger King, Thai Express, The Coffee Club, Ribs and Rumps, and Riverside brands.

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RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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Hospitality Sector Neutral Finding a Point Of Entry

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