TRIS Rating Co., Ltd. has assigned the rating of “A” to the proposed issue of up to Bt1,500 million in senior debentures of Minor International PLC (MINT). At the same time, TRIS Rating has also affirmed the company and current issue ratings of MINT at “A”. The outlook remains “stable”. The ratings reflect MINT’s diverse portfolio of well-accepted brands that strengthen its market positions in its three main lines of business: hotel; quick service restaurant (QSR), and retail trading and contract manufacturing. The ratings also reflect a capable management team, a growing overseas presence in hotel operation and management, and the potential to franchise its QSR brands in local and international markets. However, these strengths are partially offset by unfavourable operating environment caused by political instability, the economically sensitive and seasonal nature of the hotel industry, and the strong competition and low margins faced by the QSR and retail trading businesses.
MINT will partly use the proceeds from the new debentures to refinance its existing debentures of Bt1,000 million maturing on 8 December 2010. The remainder will be used to finance working capital.
The “stable” outlook is based on the expectation that MINT’s operating cash flow will remain strong. Through an uncertain business environment, MINT is expected to maintain ample liquidity to ensure smooth operations and finance part of the committed capital expenditures with operating cash flow. MINT’s business strategy to grow both organically and through acquisition will determine leverage level. If there is a continuous rise in financial leverage and a consistently high leverage level, it could jeopardize MINT’s credit quality.
TRIS Rating reported that MINT was founded in 1978 by Mr. William Ellwood Heinecke to operate a hotel in Thailand. The Heinecke family is the major shareholder, with a 33% stake. MINT has continuously expanded its hotel portfolio during the past few years, making it one of the most diversified hotel companies in Thailand. MINT’s hotel portfolio includes 32 properties (over 3,655 keys) located in Bangkok and other top-ranked tourist destinations including Thailand, Indonesia, the Maldives, Sri Lanka, Tanzania, Kenya, United Arab Emirates (UAE) and Vietnam. The hotels are managed and operated under well-recognized international brands (“Marriott” and “Four Seasons”) and its own brands (“Anantara”, “Elewana” and “Naladhu”). The group’s food business is operated by MINOR Food Group PLC (MFG). MFG, which was established in 1980, is the largest QSR operator in Thailand, operating four international QSR franchise brands (“Swensen’s”, “Sizzler”, “Dairy Queen” and “Burger King”) and its own brands (“The Pizza Company”, “The Coffee Club” and “Thai Express”). At the end of September 2010, MFG had 690 outlets and 443franchises and sub-franchises located in Thailand and overseas. In mid-2009, the company reorganized to consolidate the operations of Minor Corporations PLC (MINOR), which included fashion, cosmetics and manufacturing, under the MINT umbrella. Within MINOR, the key brands are Gap, Esprit, Bossini, Red Earth, and Bloom.
TRIS Rating said, in the first nine months of 2010, MINT’s total revenue (excluding dividend receipts and other income) grew 13% year-on-year (y-o-y) to Bt13,116 million, driven mainly by the full consolidation of MINOR’s performance. The hotel and QSR businesses reported revenue growth of 3% and 4%, respectively. The major revenue contributor was QSR business which contributed 56%, followed by the hotel and spa business at 26%, and the retail trading and contract manufacturing business at 15%. The operating margin before depreciation and amortization expenses was 14.9% in the first nine months of 2010, down from 17.42% in the same period of the prior year, mainly as a result of MINOR’s low-margin business and lower margins in the hotel business. The margin of the earnings before interest, tax, depreciation and amortization (EBITDA) of the hotel business in the first nine months of 2010 was 28%, down from 30% y-o-y. The tourism industry was adversely affected by the political disturbance in the second quarter of 2010 which cut tourist arrivals and domestic tourism, discouraged travel demand, especially among high-end tourists. Among MINT’s own hotel portfolio, hotels under the Four Seasons brand were affected the most and the Four Seasons hotel in Bangkok closed for a month. The occupancy rate (OR) of the Four Seasons hotels dropped to 15% in the second quarter of 2010, compared with 35.7% in the same period of the prior year. Thanks to a strong rebound in foreign tourist arrivals in the first and third quarter of 2010, the OR of MINT’s owned hotels in the first nine months of 2010 were 55%, up 2% y-o-y. The average room rate (ADR) was, however, down slightly by 2% y-o-y to Bt4,716 per night due to strong price competition. As such, the group’s revenue per available room (RevPar) was relatively unchanged at Bt2,590 per night. The QSR and retail trading businesses reported fairly stable EBITDA with margins of 15% and 5% in the first nine months of 2010, respectively. It is expected that MINT’s overall operating performance will further improve in the fourth quarter of 2010 as it will be the peak season for all businesses, especially hotels.
As of September 2010, MINT’s adjusted debt (including annual lease capitalization and contingent liabilities to related companies) stood at Bt15,315 million, up Bt2,174 million from the year end of 2009. The rise was partly due to finance capital expenditures (CAPEX) and additional investments and acquisition. MINT already spent by Bt3,784 million in capital for the first nine months of 2010. The CAPEX were mostly used to finance construction of two hotels (St. Regis, Bangkok and Anantara Kihavah, the Maldives). MINT expected that total CAPEX and investments in 2010 will reach Bt6,000 million. As of September 2010, the adjusted debt to capitalization ratio was 54.12%, up from 52.16% as of December 2009. The EBITDA interest coverage ratio was slightly lower but remained acceptable at 6.89 times, said TRIS Rating. -- End
Company Rating: Affirmed at A Issue Ratings: MINT11OA: Bt1,000 million senior debentures due 2011 Affirmed at A MINT129A: Bt1,840 million senior debentures due 2012 Affirmed at A MINT137A: Bt2,000 million senior debentures due 2013 Affirmed at A MINT149A: Bt2,060 million senior debentures due 2014 Affirmed at A MINT155A: Bt2,500 million senior debentures due 2015 Affirmed at A Up to Bt1,500 million senior debentures due within 2017 A Rating Outlook: Stable
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