• Expect 1Q18F profit to edge down 1% yoy to Bt1.9bn (+18% qoq) in the absence of sales at Layan Residence in Phuket; Hotel operations remain strong both in Thailand and overseas
• 2Q-3Q18 earnings will be driven by peak tourist season at Portugal hotels which renovation program is completed
• OUTPERFORM, DCF-based TP of Bt47/sh implies 35x FY18F P/E; expect F&B operations to improve gradually

Major hotel portfolios to report strong RevPar growth in 1Q18F

We expect RevPar to grow by an impressive 12% yoy in 1Q18F. Thai hotels should report 13% RevPar growth driven by peak tourist season, while the overseas hotel portfolio should report 11% RevPar growth (vs only 3% yoy in 2017) driven by Portugal hotels as renovations have been completed. Maldives hotel operation should turnaround with RevPar expected to grow by double-digit in 1Q18 (vs -2% in 2017). MINT is also trying to close one unit sale at Layan Residence by Anantara in Phuket and book revenue in 1Q18, but we conservatively excluded that (it sold three units in 1Q17). Thus, Hotel & Mixed-use revenue should be flat yoy. This should lead to weaker EBITDA margin (-0.4 ppt yoy) in the quarter. However, weak real estate revenue should be partly offset by double-digit growth in AVC revenue. For F&B, SSS of Thai restaurants should edge down 1% yoy due to still-weak consumption, while China restaurants, especially Riverside, should show negative SSSG due to competition. Overall, core profit should drop 1% yoy to Bt1.9bn in 1Q18F.

Cost control program should mitigate soft F&B business

Some investors are concerned about weak 1Q18 earnings. However, MINT’s hotel operation remains strong as its major hotel portfolios (Thailand, Portugal, Australia, Brazil and Maldives) should deliver RevPar growth in 1Q18F and the following quarters. We are entering the low tourist season in Thailand but it will be peak season (June-August) in Portugal. Our concern is the F&B operations which we expect a gradual recovery. If the economy and/or consumption does not pick up soon, MINT would book negative SSSG this year but should be able to maintain EBITDA margin at 18% (we assumed 19%) with its effective cost control.

Cheapest option to capture strong tourism sector in Thailand

MINT’s share price has been volatile in recent weeks due to expectations of soft 1Q18 earnings but we see this an opportunity to accumulate the stock. MINT is trading at attractive 29x FY18F P/E, below regional peers’ average of 35x. MINT has diversified revenue base (51% from Thailand, 49% from overseas).