Bangkok--21 Aug--TRIS Rating
TRIS Rating Co., Ltd. has assigned the rating of the proposed up to Bt3,900 million senior debentures of Minor International PLC (MINT) at “A”. At the same time, TRIS Rating has affirmed the company and current issue ratings of MINT at “A”. The rating outlook is “stable”. The ratings reflect MINT’s acceptable financial profile, diverse portfolio and strong market position in the hotel and quick service restaurant (QSR) businesses, its capable management team, a growing overseas presence in the hotel management business, and the potential to franchise its QSR brands both locally and internationally. However, these factors are partially offset by the seasonal nature of the hotel industry, which is highly sensitive to external factors, and the highly competitive and low margin nature of the QSR industry. MINT is continuing to make substantial investments in luxury residential properties and international hotels, which, along with the negative impact of the continually strengthening baht on hotel operations, are additional concerns.
The “stable” outlook is based on the expectation that MINT’s cash flow will remain strong and management will continue to prudently finance its expansion plan using both internal cash flow and debt.
TRIS Rating reported that MINT was founded in 1978 by Mr. William Ellwood Heinecke to operate hotels in Thailand. The company’s hotel portfolio has grown impressively during the last seven years, making it one of the most diversified hotel groups in Thailand. MINT’s diverse hotel portfolio includes 15 city-center hotels and elegant spa resorts (over 2,300 rooms) that are owned or managed by MINT in Thailand, the Maldives and Vietnam. The hotels are managed and operated under well-recognized international brands (Marriott and Four Seasons) and its own brand (Anantara). After the restructuring of MINOR Group in 2003, MINT took over the operations of the MINOR Food Group PLC (MFG). MFG, which was established in 1980, is the largest QSR operator in Thailand, running four international franchised QSR brands (Swensen’s, Sizzler, Dairy Queen, and Burger King) as well as one of its own brand (The Pizza Company). At the end of June 2007, MFG operated or sub-franchised a total of 649 QSR outlets in Thailand and overseas.
MINT’s revenue from hotel and QSR account for more than 90% of it total revenue. Compared to its peers in both businesses, MINT’s revenue base is larger and more diverse, having grown impressively during the past three years. In the first half of 2007, though hotel industry profitability was pressured by the strengthening of the Thai bath as most of hotel rates are quoted in US dollars, MINT’s total revenue grew by 14% to Bt6,567 million, from Bt5,758 million in the same period of 2006 driven by hotel and QSR operations. Revenue from hotels increased by 16% to Bt2,648 million due to the opening of Four Season Samui Village in early 2007 and the improvement of overall revenue per available room (RevPAR) to Bt3,777 in the first half of 2007 since MINT managed to have most of the hotel rates quoted at predetermined US$/baht exchange rates. Revenue from the QSR business also grew, by 10% to Bt3,350 million, as a result of the opening of new QSR outlets in the first half of 2007.
TRIS Rating said, MINT’s debt to capitalization ratio increased slightly from 45.3% at the end of 2006 to 47.3% in June 2007 as total debt increased to Bt7,542 million. Though the company aims to transform into a more asset-light company, its expansion plans will require significant capital expenditures to enable it to achieve its long-term growth. It is expected that MINT will heavily invest in hotel operations since the company has announced it will invest in the St. Regis Hotel & Residence Bangkok, which will require more than Bt4,700 million over the next three years to fund the project construction. MINT’s project expansion will be partly financed by internal cash flow. The company’s funds from operations are expected to be around Bt2,200-Bt2,500 million per year. Thus, MINT is expected to keep its leverage around 50% during the construction period.