TRIS Rating Co., Ltd. has affirmed the company rating of Minor International PLC (MINT) at “A” and has affirmed the ratings of MINT’s existing senior debentures at “A”. At the same time, TRIS Rating has assigned the rating of “A” to MINT’s proposed issue of up to Bt800 million in senior debentures. The outlook remains “stable”. The proceeds from the new debentures will be used to refinance existing debentures, maturing in October 2011. 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 intense 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 which includes contract manufacturing. In the first half of 2011, the QSR segment was the largest revenue contributor, comprising 45.1% of total sales. Hotel and retail trading contributed 27.2% and 13.2%, respectively. After the successful acquisition of Oaks Hotels and Resorts Ltd. (OAKS) in June 2011, TRIS Rating said that MINT’s hotel portfolio doubled to 73 properties with 9,646 keys, comprising 15 owned hotels (2,563 keys), 13 hotels under joint ventures (733 keys), and 44 managed hotels and serviced suites (6,350 keys). These properties are located across Asia, the Indian sub-continent, the Middle East, and Australia. The hotels are managed and operated under well-recognized international brands (Marriott, Four Seasons, and St. Regis) and its own brands (Anantara, Elewana, Naladhu, and OAKS).
MINOR Food Group PLC (MFG), a wholly-owned subsidiary, 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 June 2011, MFG had 682 outlets and 487 franchises and sub-franchises located in Thailand and overseas. Since 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’s operating performance 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.Operating performance in the first half of 2011 showed a significant improvement in terms of revenue and net profit compared with the same period of the prior year. Revenue grew by 37% to Bt12,275 million, underpinned by the revenue recognition from sales in the St. Regis Residence and Anantara Vacation Club (AVC). Revenue for the first half of the year also included one month’s operation of OAKS, which also pushed revenue higher. Performance also improved across all business segments. However, the operating margin dropped slightly to 15.63%, compared with 16.62% in the same period of the prior year, despite an increase in operating margin in the second quarter. Part of the reason for the lower margin in the first half of the year 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.
MINT’s total debt increased from Bt14,368 million in 2010 to Bt19,574 million in June 2011 due to the debt-funded acquisition and consolidation of OAKS. The adjusted debt to capitalization ratio surged to 58.52% as of June 2011. Going forward, MINT has a strategy 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. -- 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 MINT183A: Bt1,500 million senior debentures due 2018 Affirmed at A Up to Bt800 million senior debentures due within 2021 A Rating Outlook: Stable
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