TRIS Rating views no immediate impact on company and issue ratings of MINT after an announcement to acquire OAK, an Australian serviced apartment management operator. Even though the acquisition may result in higher debt level for MINT, its current business profile is strong with acceptable cash flow generation.
TRIS Rating Co., Ltd. says today that there is no significant credit implication at present with regard to the plans of Minor International PLC (MINT) to expand its hospitality business overseas. On 21 March 2011, MINT announced its intention to make an off- market cash takeover offer for all of the shares of Oaks Hotels and Resorts Ltd. (OAK) through its wholly-owned subsidiary, Delicious Food Holding (Singapore) Pte Ltd., at a price of AUD 0.35 per share. The tender offer followed MINT’s initial purchase of a 14.9% stake in OAK on 18 March 2011. In addition, MINT has a commitment to purchase a further 5% stake subject to approval by the Foreign Investment Review Board (FIRB). The offer is subject to the condition that MINT must be able to acquire in aggregate a majority of OAK’s shares. The transaction, considering the purchase of up to 100% of the shares, will cost MINT AUD60.8 million (approximately Bt1,854 million). While the transaction may cause an increase in total consolidated debt of MINT if OAK’s short-term debt and additional debt needed to finance the acquisition are included, OAK’s positive funds from operations would enhance MINT’s cash flow. The investment in OAK will significantly broaden MINT’s hospitality management business into the Asia-Pacific region and double the company’s hotel interests to 71 properties across Asia, Indian sub-continent, the Middle East and Australia.
OAK is one of the leading serviced apartment management companies in Australia. As of December 2010, OAK managed 32 properties in Australia, five properties in New Zealand and one property in Dubai. Most of OAK’s properties are marketed under the “Oaks” brand name. OAK reported over AUD120 million per annum in revenue in the last two fiscal years with earnings before interest, tax, depreciation and amortization (EBITDA) each year of AUD28-29 million. However, due to loss provisions for the Dubai property, net income in fiscal year 2010 declined to AUD-3,544 million, compared with AUD9,753 million in fiscal year 2009. In the first six months of fiscal year 2011 (July-December 2010), OAK’s revenue was AUD70.8 million with EBITDA of AUD19 million. TRIS Rating said, one immediate post- acquisition will be the restructuring of OAK’s short-term debt to a longer term and structure appropriate with its business model.
TRIS Rating said, the acquisition may result in higher debt level for MINT. However, MINT’s current business profile is considered strong with acceptable cash flow generation ability. In 2010, the company generated funds from operations of Bt2,702 million. In 2011, the company expects to recognize cash inflow from the transfer of St. Regis Residence on the back of presales over Bt1,000 million in 2010 and expectation of more sales in 2011. MINT clearly stated to pursue its growth strategy via merger and acquisition. The impact of future investment to the credit quality will be factored by its capital structure and the return on investment.
Currently, MINT’s company and senior debenture ratings were assigned at “A” with “stable” outlook by TRIS Rating. -- End
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