KTB Security (Thailand) (KTBST) has upgraded the rating of Minor International Public Company Limited (MINT) from “HOLD” to “BUY” with a revised target price from ฿22.00/share to ฿28.00/share, expecting NH chain hotels to improve rapidly on COVID-19 vaccination amid healthy financial position.
KTBST stated that it has upgraded the rating on MINT to BUY from HOLD and the 2021E target price to Bt28.00 from Bt22.00 based on DCF method, as KTBST increased terminal growth to 2.5% (from 2.0%), which is equivalent to EV/EBITDA of 15x, or -0.5 SD below its 10-yr average.
Key reasons behind the upgrade were 1) higher occupancy rate in European hotels, while MINT’s NH hotel network normally generates 60% of total revenue in European hotels, 2) a lower net D/E, which we estimate to decrease to 1.30x and 1.45x in 2020-21E following the recent capital increase, while MINT’s covenant is at 1.75x, and 3) stronger earnings outlook in 2021E should the government open the borders to international visitors. In 2021E, KTBST forecasted MINT’s earnings to swing to a net profit of Bt1.8bn in 2021E.
More importantly, MINT’s share price outperformed the SET Index by 27% in one month. The stock’s valuation remains attractive, trading at 12.7x 2021E EB/EBITDA, which is relatively lower than 14.2x of its peer ERW but on par with 12.5x of CENTEL. A successful development of COVID-19 vaccines should provide support to the share price, as KTBST believed European countries will be in the top priority to get mass vaccination, which should bode well for NH’s hotel network.