TRIS Rating has assigned the rating of “A” to the proposed issue of up to Bt1,500 million in senior debentures of Minor International PLC (MINT). At the same time, TRIS Rating has affirmed the company and current issue ratings of MINT at “A” with “stable” outlook. The proceeds from the new debentures will be used to finance its 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 MINT’s “asset light” strategy and its overseas diversification efforts in both the hotel and food segments. However, these strengths are partially offset by the company’s aggressive investment strategy, intense competition, the seasonal and economically sensitive of the hotel industry, and the low margins in 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 its growing assets. A continued rise in financial leverage could negatively affect MINT’s credit quality.
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 the first nine months of 2012, the QSR segment was the largest revenue contributor, comprising 40% of total sales. Hotels, retail trading, and residential property contributed 39%, 10%, and 9%, respectively.
As of September 2012, MINT’s hotel portfolio comprised 80 properties, with over 10,000 keys, which are located in top-ranked tourist destinations in nine countries spanning South Africa, the Middle East, and the Asia-Pacific region. Out of the total number of rooms available, MINT owns some properties outright while MINT is engaged in some properties through management service contracts, including management letting rights (MLR) operated by Oaks Hotel & Resorts Ltd. (Oaks). The hotels are managed and operated under well-recognized international brands such as Marriott, Four Seasons, and St. Regis, plus MINT’s 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, overseeing four international QSR franchise brands: Swensen’s, Sizzler, Dairy Queen, and Burger King. MFG also operates restaurants under three of its own brands: The Pizza Company, The Coffee Club, and Thai Express. As of September 2012, MFG had 726 outlets plus 578 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. MINOR currently is the distributor of approximately 20 brands through 226 outlets. Within MINOR, the key brands are Esprit, Gap, Bossini, Charles & Keith, and etc.
In the first nine months of 2012, MINT’s total revenue increased by 21% year-on-year (y-o-y) to Bt23,073 million, mainly driven by significant improvements in the hotel and QSR businesses. Revenue from the hotel segment jumped by 54% y-o-y to Bt8,441 million in the first nine months of 2012. The strong growth in the hotel segment was supported by the peaceful political climate in Thailand, the consolidation of Oaks, and the newly-launched St. Regis and Anantara Kihavah hotels. 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 11% y-o-y in the first nine months of 2012. Across all lines of business, MINT’s operating margin rebounded from 15.7% in 2011 to 17.6% in the first nine months of 2012.
MINT’s capital structure weakened while its liquidity profile remained acceptable. The liquidity profile, as measured by the earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio, dropped from 7.5 times in 2010 to 5.4 times in 2011, but slightly rebounded to 5.7 times in the first nine months of 2012. The funds from operations (FFOs) to debt ratio was approximately 17% during 2010 and 2011, and stood at 14.9% (non-annualized) in the first nine months of 2012. Total debt increased from Bt14,368 million in 2010 to Bt19,824 million in 2011 and to Bt22,818 million in the first nine months of 2012, following the acquisition of Oaks and Bundarika hotel. The debt to capitalization ratio weakened from 53.1% as of December 2010 to 59.1% as of December 2011 but then slightly improved to 58.7% as of September 2012 because MINT’s 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 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 will partly finance its investment program by internal cash flow and be able to manage its capital structure so as to avoid becoming overleveraged.
Company Rating: A Issue Ratings: MINT137A: Bt2,000 million senior debentures due 2013 A MINT149A: Bt2,060 million senior debentures due 2014 A MINT155A: Bt2,500 million senior debentures due 2015 A MINT15DA: Bt500 million senior debentures due 2015 A MINT17DA: Bt1,000 million senior debentures due 2017 A MINT183A: Bt1,500 million senior debentures due 2018 A MINT18OA: Bt500 million senior debentures due 2018 A MINT21OA: Bt300 million senior debentures due 2021 A MINT178A: Bt1,800 million senior debentures due 2017 A MINT228A: Bt2,700 million senior debentures due 2022 A Up to Bt1,500 million senior debentures due within 2017 A Rating Outlook: Stable
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