TRIS Rating Co., Ltd. has affirmed the company and senior debentures ratings of Minor International PLC (MINT) at “A” with “stable” outlook. The ratings reflect MINT’s diverse portfolio of businesses, strong market positions, and a capable management team. The ratings also take into consideration the growing “asset light” business and overseas diversification efforts for both the hotel and food segments. However, these strengths are partially offset by the economically sensitive and seasonal nature of the hotel industry, the severe competition, and low margins faced by the quick service restaurants (QSR) and retail trading businesses, along with the company’s aggressive investment strategy.
The “stable” outlook is based on the expectation that MINT’s cash generating ability will remain strong. Hotel operations are expected to improve in tandem with the industry recovery. A rise in financing leverage, if insistent, could negatively affect MINT’s credit quality.
TRIS Rating reported that MINT was founded in 1978 by Mr. William Ellwood Heinecke. The company is a holding company owning subsidiaries engaged in three main lines of business: hotel, QSR, and retail trading and contract manufacturing. In 2010, the QSR segment was the largest revenue contributor, comprising 54.5% of total sales. Hotel and retail trading contributed 26.8% and 14.8%, respectively.
TRIS Rating said, MINT’s hotel portfolio as of April 2011 comprised 15 owned hotels (2,563 keys), 13 hotels under joint ventures (733 keys), and eight managed hotels (1,167 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, Four Seasons, and St. Regis) and its own brands (Anantara, Elewana, and Naladhu). In the second quarter of 2011, MINT invested around Bt2,700 million to expand its hospitality business overseas by acquiring Oaks Hotels and Resorts Ltd. (OAKS), an Australian serviced apartment management company. Consequently, MINT’s hotel portfolio increased to 72 properties with around 8,900 keys across Asia, the Indian sub-continent, the Middle East, and Australia.
MINT’s wholly-owned subsidiary, MINOR Food Group PLC (MFG), operates the food business. 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). As of March 2011, MFG had 686 outlets and 471 franchises and sub-franchises located in Thailand and overseas. In mid-2009, the company reorganized to consolidate the operations of Minor Corporation PLC (MINOR), which included fashions, cosmetics, and manufacturing, under the MINT umbrella. Within MINOR, the key brands are Gap, Esprit, Bossini, Red Earth, Bloom, Charles & Keith, and Tumi.
MINT reported total revenue (excluding dividend receipts and other income) of Bt18,140 million in 2010, a growth of 10% year-on-year (y-o-y). The operating margin fell to 15.01% compared with 18.1% in 2009. MINT’s operating per-formance over the last few years was hampered by the depressed performance of hotel segment as a result from the global financial crisis and domestic political upheaval such as the airport closure in December 2008 and political unrest during April and May 2010. Revenue from the hotel segment declined from more than Bt6,000 million in 2008 to Bt4,864 million in 2010. Nonetheless, the shortfall was partly offset by continuous growth of the QSR business, which relies on the domestic market and is more resilient to economic changes. The weaker operating performance during 2008-2010 coupled with large investments in two luxury hotels (St. Regis, Bangkok and Anantara Kihavah, the Maldives) resulting in a weaker financial profile over the past few years. MINT’s total debt increased from Bt9,101 million in 2008 to Bt14,368 million in 2010. As of December 2010, the adjusted debt to capitalization ratio was 52.94%, up from 51.32% as of December 2009.
For the first quarter of 2011, MINT’s total revenue increased 26% y-o-y, mainly due to revenue recognition from sales of St. Regis Residence and Anantara Vacation Club (AVC). The operating margin slightly improved to 19.79%, though it remains below 20% as achieved in the past. Part of the reason
for the lower margin in this period was the higher selling and administrative expenses incurred from the pre-opening expenses of Anantara Kihavah, the Maldives, and St. Regis, Bangkok, which opened in February and April 2011, and the extra marketing expenses for the launch of St. Regis Residence and AVC. At the end of March 2011, MINT’s leverage increased to 52.14%. Going forward, MINT’s growth strategy is to grow both organically and through acquisition. The growth may be funded in part with new debt. TRIS Rating expects MINT to balance its earnings and leverage to be at the proper levels.
MINT’s liquidity profile remained acceptable. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio dropped from 11 times in 2008 to 8.6 times and 7.5 times in 2009 and 2010, respectively, but rebounded to 11 times in the first quarter of 2011. Similarly, funds from operations (FFO) to adjusted debt ratio declined during 2009 and 2010, and stood at 7.2% as of March 2011, said TRIS Rating. -- End
Company Rating: Affirmed at A Issue Ratings: MINT110A: 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 MINT183A: Bt1,500 million senior debentures due 2018 Affirmed at A Rating Outlook: Stable
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