TRIS Rating Co., Ltd. has assigned the rating of “A” to the proposed issues of up to Bt1,500 million in senior debentures of Minor International PLC (MINT). At the same time, TRIS Rating has affirmed the company rating of MINT and the ratings of its current senior debentures at “A” with “stable” outlook. The proceeds from the new debentures will partly be used to refinance loan with financial institutions and/or to finance general working capital. 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 expand QSR business and franchise its QSR brands in local and international markets. However, these strengths can be 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.
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. As of December 2010, MINT’s hotel portfolio included 33 properties (over 4,114 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 December 2010, MFG had 685 outlets and 463 franchises 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, Bloom, and Tumi.
In 2010, MINT’s total revenue (excluding dividend receipts and other income) grew 10% year-on-year (y-o-y) to Bt18,140 million. The rise was driven mainly by the full consolidation of MINOR’s performance and the continuous growth of the QSR segment offsetting a continuous decline in revenue from the hotel business. In the fourth quarter of 2010, MINT started to recognize income from real estate development of Bt216 million from the sale of one unit of St. Regis Residence together with income from timeshare properties under MINT’s Anantara Vacation Club brand. MINT’s operating margin in 2010 fell to 15.3% compared with 18.1% in 2009, due mainly to a decline in profitability in the hotel business. In 2010, the tourism industry was adversely affected by the political disturbance in the second quarter of 2010 which cut tourist arrivals and domestic tourism, and reduced travel demand, especially among high-end tourists. Although the political riots ended in May 2010, the state of emergency in Bangkok was in place until late December 2010 due to periodic anti- government rallies.
In MINT’s own hotel portfolio, TRIS Rating said, hotels in Bangkok (Four Seasons and
Marriott) were affected the most. The occupancy rate (OR) of hotels in Bangkok dropped to
51%, compared with 56% in the prior year. The average daily rate (ADR) was down by 6% y-o-y
to Bt4,148 per night. However, the performance of other resort hotels were satisfactory.
The OR of hotel owned by MINT in 2010 were 56.2%, up 0.37% y-o-y. The ADR was, however,
down slightly, falling by 3% y-o-y to Bt4,852 per night due to strong price competition. As
such, the group’s revenue per available room (RevPar) also declined, falling by 2.6% y-o-y
to Bt2,727 per night. The ratio of the earnings before interest, tax, depreciation and
amortization (EBITDA) to sales for the hotel business in 2010 was 27%, down from 31% y-o-y.
The lower EBITDA margin was mainly due to lower revenue coupled with higher selling and
administrative expenses incurred from pre-operating costs of two new hotels (St. Regis,
Bangkok and Anantara Kihavah, the Maldives) and expenses incurred in relation to the launch
of Anantara Vacation Club. For the QSR segment, the performance was good. Revenue grew by
4.2% to Bt9,883 million while the EBITDA margin rose by 1% to 17%. The improvements were
due to same store sales growth, especially for Dairy Queen and The Pizza Company. The
retail trading business also improved along with the economic recovery.
As of December 2010, MINT’s adjusted debt (including annual lease capitalization and contingent liabilities to related companies) stood at Bt16,008 million, up Bt2,867 million from the end of 2009. The rise was to finance capital expenditures and additional investments. MINT spent by Bt5,298 million in capital in 2010. The expenditures were mostly used to finance the construction of two hotels, St. Regis and Anantara Kihavah. MINT expects that total capital expenditures and investments in 2011 will be approximately Bt3,000 million which is planned to be funded by the proceeds from residential sales and operating cash flow. As of December 2010, the adjusted debt to capitalization ratio was 53.69%, up from 52.16% as of December 2009. The EBITDA interest coverage ratio was slightly lower but remained acceptable at 7.3 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 MINT15DA: Bt500 million senior debentures due 2015 Affirmed at A MINT17DA: Bt1,000 million senior debentures due 2017 Affirmed at A Up to Bt1,500 million senior debentures due within 2018 A Rating Outlook: Stable
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