TRIS Rating Co., Ltd. has affirmed the company and current issue ratings of Minor International PLC (MINT) at “A”. At the same time, TRIS Rating has assigned the rating of “A” to MINT’s proposed issue of up to Bt4,000 million in senior debentures. The outlook remains “stable”. The proceeds from the proposed debenture issue will be used to refinance MINT’s maturing debentures and for new investments. The ratings reflect MINT’s diverse portfolio of businesses, strong market positions, and capable management team. The ratings also take into consideration the growth in hotel segment, thanks to the “asset light” strategy and overseas diversification efforts in both the hotel and food segments. However, these strengths are partially offset by the company’s aggressive investment strategy, the economically sensitive and seasonal nature of the hotel industry, plus the intense competition and low margins faced by the quick service restaurants (QSR) and retail trading businesses. 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 and MINT’s recent acquisition. A continued rise in financial leverage 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: hospitality and mixed use, QSR, and retail trading, which includes contract manufacturing. In 2011, the QSR segment was the largest revenue contributor, comprising 41.0% of total sales. Hotels, retail trading, and residential property contributed 31.1%, 11.2%, and 10.8%, respectively.
TRIS Rating said, as of March 2012, MINT’s hotel portfolio comprised 15 hotels it owns directly (2,553 keys), 13 hotels owned through joint ventures (731 keys), 38 hotels under management letting rights (MLR) (5,163 keys), and nine managed hotels (1,152 keys). MINT’s hotels are located in top-ranked tourist destinations in nine countries spanned over Asia Pacific, South Africa, and Middle East region. The hotels are managed and operated under well-recognized international brands such as Marriott, Four Seasons, and St. Regis, and its own brands like Anantara, Oaks, Elewana, Naladhu and, Avani.
The 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 three of its own brands, The Pizza Company, The Coffee Club, and Thai Express. As of March 2012, MFG had 717 outlets and 547 franchises and sub-franchises located in 15 countries. Minor Corporation PLC (MINOR) is responsible for the retail trading business, which includes fashions, cosmetics, and manufacturing, under the MINT umbrella. Within MINOR, the key brands are Esprit, Gap, Bossini, Charles & Keith, and etc.
MINT reported total sales of Bt26,137 million in 2011, a 44% rise from 2010. The impressive growth was mainly due to the recognition of revenue from sales of residential property and the significant increase in hotel revenue. In mid-2011, the company acquired Oaks, a major Australian MLR operator and serviced apartment management company. In 2011, the company also launched two new luxury hotels: St. Regis in Bangkok and Anantara Kihavah in the Maldives. Thus, revenue from the hotel segment jumped to Bt8,135 million in 2011 from Bt4,322 million in 2010. The strong growth in the hotel segment was also supported by the quick recovery of the tourism industry and the absence of political tension in 2011. During the severe flood in the fourth quarter of 2011, MINT’s hotel properties were not damaged, but sales was slightly affected from some reservation cancellation. The QSR segment, which relies on the domestic market and is more resilient in the face of economic changes, also posted a strong growth of 12% in 2011. In the retail trading segment, revenue increased by 11% to Bt2,925 million in 2011 mainly contributed by growth in apparel sales. The retail trading business posted a significant decline in earnings before interest, tax, depreciation, and amortization (EBITDA) as its factory was forced to close during the flood and the company had write-off assets of Bt176 million. In the first quarter of 2012, MINT’s total revenue increased by 31% year-on-year (y-o-y), mainly driven by operation of Oaks and newly-launched St. Regis and Anantara Kihavah hotels. Across all lines of business, MINT’s operating margin slightly rebounded from 15.2% in 2010 to 15.7% in 2011. In the first quarter of 2012, the operating margin increased to 21.9% because this quarter is the peak season for the hotel business.
MINT’s capital structure weakened in 2011 while its liquidity profile remained acceptable. Liquidity profile as measured by the adjusted EBITDA interest coverage ratio dropped from 7.5 times in 2010 to 5.4 times in 2011, but rebounded to 7.8 times in the first quarter of 2012. The adjusted funds from operations (FFOs) to debt ratio was approximately 17% during 2010 through 2011, and stood at 7.8% as of March 2012. Total debt increased from Bt14,368 million in 2010 to Bt19,824 million in 2011 and to Bt19,661 million in the first quarter of 2012, following the acquisition of Oaks. The adjusted debt to capitalization ratio weakened from 53.1% as of December 2010 to 59.1% as of December 2011 but then improved to 56.9% as of March 2012 as the equity base strengthened. Going forward, MINT’s growth strategy calls for new investments worth more than Bt25,000 million over the next three years. The investments will be financed in part by operating cash flow and by new debt. As a result, the amount of the outstanding debt is expected to continue to rise during the next couple of years. TRIS Rating expects that MINT could manage its capital structure not to be over leverage. — End
Company Rating: Affirmed at A Issue Ratings: 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 MINT18OA: Bt500 million senior debentures due 2018 Affirmed at A MINT21OA: Bt300 million senior debentures due 2021 Affirmed at A Up to Bt4,000 million senior debentures due within 2022 A Rating Outlook: Stable
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