Bangkok--8 Jul--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Minor International PLC (MINT) at “A” with “stable” outlook. The ratings reflect MINT’s strong operating performance, a diverse portfolio of well-accepted brands that gives it strong market positions in both the hotel and quick service restaurant (QSR) businesses, a capable management team, a growing overseas presence in hotel management, and the potential to franchise its QSR brands in local and international markets. However, these factors are partially offset by the seasonal nature of the hotel industry, which is highly sensitive to external factors, the highly competitive and low margin nature of the QSR industry, and the potential impact of high and rising inflation. An additional concern is MINT’s investments in luxury residential properties and international hotels, which will need substantial amounts of cash to invest.
The “stable” outlook is based on the expectation that MINT’s cash flow will remain strong and will be used mostly to support its aggressive capital expenditure (CAPEX) plan. Financial leverage is expected to increase in the medium term as the company develops the hotel and residential property projects that are currently in the pipeline. If investments become overly aggressive, the company’s credit quality may weaken.
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 17 properties (2,352 keys), located in Bangkok and top ranking tourist destinations that are owned and/or managed by MINT. These properties are located in Thailand, the Maldives, Sri Lanka 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 the MINOR Group in 2003, MINT took over the group’s food business, which is operated under The MINOR Food Group PLC (MFG). MFG which was established in 1980, is the largest QSR operator in Thailand, operating four international franchised QSR brands (Swensen’s, Sizzler, Dairy Queen, and Burger King) and its own brand (The Pizza Company). At the end of December 2007, MFG had a total of 553 outlets and 123 sub-franchises located in Thailand and overseas.
TRIS Rating said, revenue from hotel and QSR sales account for approximately 90% of MINT’s total revenue. Compared with its peers in both businesses, MINT’s revenue base is larger and more diverse, having grown impressively in recent years. Driven by more QSR outlets and solid performance in hotel operations, MINT’s revenue grew by 16% from Bt11,716 million in 2006 to Bt13,538 million in 2007. For the first three months of 2008, revenue was up 18% to Bt4,185 million compared with Bt3,554 million in the same period of 2007. MINT’s average revenue per available room (RevPAR) increased from Bt3,571 in 2006 to Bt4,037 in 2007. The rise in RevPAR was due to MINT’s continuing success of its newly-opened hotel, together with favorable results for the Thai tourism industry. The food business has experienced slower performance in recent years due to intense competition and limited expansion of new outlets. Same store sales contracted by 0.9% in 2007, but grew by 6.6% in the first quarter of 2008.
MINT has been actively investing in the QSR and hotel businesses, putting more than Bt2,300 million in both QSR and hotel businesses internationally during the past year. The company acquired a 50% share of the Coffee Club, an Australia-based coffee dining chain with 193 outlets, and a 70% share of Thai Express, a Singapore-based Asian restaurant chains with 46 outlets. MINT also leased an island in the Maldives to open new Anantara resort, and acquired a 50% stake in Elewana Afrika, the resort property developer in Tanzania. MINT’s capital expenditures increased substantially during the last five years in an effort to strengthen its market position and to support future profit growth. However, the company’s financial leverage has steadily improved. The debt to capitalization ratio decreased from 55% in 2005 to 34% in the first quarter of 2008 due to strong operating cash flows in both the hotel and food businesses. Management is expected to fund future expansions through both borrowing and internal cash flow. Leverage is thus expected to stay around 45%-55% for the next three years. MINT’s operating cash flow is solid as funds from operations (FFO) rose to Bt2,900 million in 2007 from Bt2,200 million in 2005. However, MINT has reinvested a substantial portion of the cash generated during the past three years into the hotel business, said TRIS Rating. -- End
Minor International PLC (MINT)
Company Rating: Affirmed at A
Issue Ratings:
MINT105A: Bt1,100 million senior debentures due 2010 Affirmed at A
MINT10DA: Bt1,000 million senior debentures due 2010 Affirmed at A
MINT129A: Bt1,840 million senior debentures due 2012 Affirmed at A
MINT149A: Bt2,060 million senior debentures due 2014 Affirmed at A
Rating Outlook: Stable