TRIS Rating Co., Ltd. has assigned a company rating of Central Plaza Hotel PLC (Centel) at "A-". The rating reflects the long term proven record of its management team in both the hotel and quick service restaurant (QSR) businesses, its diversified sources of cash flow from both businesses, its position as one of the key players in QSR business, and the strong positions of the major hotels in its portfolio. The rating also takes into account the support within the Central Group and the good prospects of the tourism and fast food industries. However, these strengths are partially offset by the seasonal and cyclical nature of the hotel industry and the highly-competitive and the low-margin nature of the fast food industry. The rating is based on the expectation that management will continue to expand its hotel and QSR businesses with a conservative financial policy.
The "stable" outlook incorporates the long experience of Centel's management team in both the hotel and fast food businesses, the good prospects of the hotel industry in Thailand, and well established fast food brands of its subsidiary. Although funds from operations is expected to continuously improve, debt is also expected to increase, as internal cash generation will not be sufficient to fund expansion in new hotels. In a long term, TRIS Rating expects that Centel will maintain equal levels of debt and equity in its capital structure.
TRIS Rating reported that Centel was established by the Chirathivat family to start it hotel business in 1980 and entered the fast food business in 1994. Currently, it operates eight hotels in Thailand and one in East Timor. Moreover, it provides management services for one serviced apartment in Thailand and one hotel in Vietnam. It also operates five franchised fast food brands, which include KFC, Mister Donut, Pizza Hut, Baskin-Robbins, and Auntie Anne's, under Central Restaurant Groups Co., Ltd. (CRG). Two of its hotels, Sofitel Central Plaza Bangkok and Novotel Central Sukhontha, are franchises of the Accor group, while, Sofitel Central Hua Hin Resort is managed by "Accor". Accor is one of the top-10 hotel operators worldwide, with approximately 3,900 hotels under its operations. The rest of the hotels located in major tourist destinations nationwide are under Centel's own brand.
TRIS Rating said that besides Centel's long-experienced hotel general managers, Accor also provides effective reservation system networks and retention programs, chain-wide advertising, and worldwide sales offices for the three properties under its management or franchise. Extensive brand recognition of Centel group among high-end local customers supports the marketing of its hotels. In 2001, Centel's revenue was divided 46%:54% between hotels and food. However, the portion of revenue from the food business has gradually increased to 60% in 2003 and 58% in the first half of 2004. Diverse sources of cash flow from hotels in various locations and multiple brands of QSR help Centel reduce business risks. Centel's leverage has been maintained at an acceptable range of 40%-49% during 2000-2003; however, the adjusted total debt to capitalization ratio is expected to increase after its large expansions that will be substantially funded by borrowing. Although the hotel business offers high margins, the food business, which has lower margins, caused overall margins to stabilize at the 20% level during the last five years. Centel's total debts substantially increased from Bt1,521 million in 2002 to Bt2,155 million, mainly to finance its huge capital expenditures of Bt1,214 million in 2003.
TRIS Rating also said that during the first half of 2004, the number of tourist arrivals increased 29% over the same period last year. Overall tourist arrivals for 2003 declined by 7.4% due to the Severe Acute Respiratory Syndrome (SARS) crisis. TRIS Rating expects the number of tourist arrivals will continue to grow in the medium and long term, as Thailand remains an attractive tourist destination with fascinating natural resources to attract travelers. In most tourist destinations, competition is intense due to an oversupply of rooms and low occupancy rates. While growth in the food business usually follows GDP growth trends. Accordingly, the strong growth of the Thai economy in 2004 and beyond bodes well for the prospects of the food business despite the intense competition that has resulted from low barriers to entry. -- End
Central Plaza Hotel PLC (Centel) Company Rating: A- Rating Outlook: Stable
The "stable" outlook incorporates the long experience of Centel's management team in both the hotel and fast food businesses, the good prospects of the hotel industry in Thailand, and well established fast food brands of its subsidiary. Although funds from operations is expected to continuously improve, debt is also expected to increase, as internal cash generation will not be sufficient to fund expansion in new hotels. In a long term, TRIS Rating expects that Centel will maintain equal levels of debt and equity in its capital structure.
TRIS Rating reported that Centel was established by the Chirathivat family to start it hotel business in 1980 and entered the fast food business in 1994. Currently, it operates eight hotels in Thailand and one in East Timor. Moreover, it provides management services for one serviced apartment in Thailand and one hotel in Vietnam. It also operates five franchised fast food brands, which include KFC, Mister Donut, Pizza Hut, Baskin-Robbins, and Auntie Anne's, under Central Restaurant Groups Co., Ltd. (CRG). Two of its hotels, Sofitel Central Plaza Bangkok and Novotel Central Sukhontha, are franchises of the Accor group, while, Sofitel Central Hua Hin Resort is managed by "Accor". Accor is one of the top-10 hotel operators worldwide, with approximately 3,900 hotels under its operations. The rest of the hotels located in major tourist destinations nationwide are under Centel's own brand.
TRIS Rating said that besides Centel's long-experienced hotel general managers, Accor also provides effective reservation system networks and retention programs, chain-wide advertising, and worldwide sales offices for the three properties under its management or franchise. Extensive brand recognition of Centel group among high-end local customers supports the marketing of its hotels. In 2001, Centel's revenue was divided 46%:54% between hotels and food. However, the portion of revenue from the food business has gradually increased to 60% in 2003 and 58% in the first half of 2004. Diverse sources of cash flow from hotels in various locations and multiple brands of QSR help Centel reduce business risks. Centel's leverage has been maintained at an acceptable range of 40%-49% during 2000-2003; however, the adjusted total debt to capitalization ratio is expected to increase after its large expansions that will be substantially funded by borrowing. Although the hotel business offers high margins, the food business, which has lower margins, caused overall margins to stabilize at the 20% level during the last five years. Centel's total debts substantially increased from Bt1,521 million in 2002 to Bt2,155 million, mainly to finance its huge capital expenditures of Bt1,214 million in 2003.
TRIS Rating also said that during the first half of 2004, the number of tourist arrivals increased 29% over the same period last year. Overall tourist arrivals for 2003 declined by 7.4% due to the Severe Acute Respiratory Syndrome (SARS) crisis. TRIS Rating expects the number of tourist arrivals will continue to grow in the medium and long term, as Thailand remains an attractive tourist destination with fascinating natural resources to attract travelers. In most tourist destinations, competition is intense due to an oversupply of rooms and low occupancy rates. While growth in the food business usually follows GDP growth trends. Accordingly, the strong growth of the Thai economy in 2004 and beyond bodes well for the prospects of the food business despite the intense competition that has resulted from low barriers to entry. -- End
Central Plaza Hotel PLC (Centel) Company Rating: A- Rating Outlook: Stable