Bangkok--21 Feb--TRIS Rating
TRIS Rating Co., Ltd. has upgraded the company rating of Minor International PLC (MINT) and the ratings of MINT’s senior debentures (MINT078A, MINT07NA, MINT105A, MINT10DA) to “A” from “A-” with “stable” outlook. The upgraded ratings reflect MINT’s improved financial position, its diverse portfolio with 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 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, and the highly competitive and low margin nature of the QSR industry. An additional concern is MINT’s continuing substantial investments in luxury residential properties and international hotel markets.
The “stable” outlook is based on the expectation that MINT’s cash flow will remain strong. The company’s 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. MINT’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 13 properties (2,283 rooms) of city-centre hotels and elegant spa resorts that are owned or managed by the company itself. These properties are located 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 food business of the group, which is operated under the MINOR Food Group PLC (MFG). Established in 1980, MFG is the largest QSR operator in Thailand, running four international franchised QSR brands (Swensen’s, Sizzler, Dairy Queen, and Burger King) and its own brand (The Pizza Company). At the end of September 2006, there were a total of 515 outlets and 87 sub-franchises located in Thailand and overseas.
Revenue from hotel and QSR sales account for 92% of MINT’s 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. Driven by more QSR outlets and solid performance in hotel operations, MINT’s revenue grew 26% from Bt7,948 million in 2004 to Bt10,046 million in 2005. For the first nine months of 2006, revenue was up 16% to Bt8,501 million compared with Bt7,300 million in the same period of 2005. MINT’s average revenue per available room (RevPAR) increased from Bt2,945 in 2004 to Bt3,272 in 2005 and to Bt3,400 for the first nine months of 2006. The rise in RevPAR was due to its success in achieving and maintaining guest satisfaction together with favourable results for the Thai tourism industry. The food business enjoyed same store sales growth of 5.8% in 2005 and 9.9% growth for the first nine months of 2006, despite intense competition.
Although MINT’s capital expenditures increased substantially during the last five years in an effort to strengthen its market position, the company’s financial leverage has steadily improved as the total debt to capitalization ratio decreased from 57.5% in 2004 to 54.8% in 2005 and to 45.9% in September 2006. The main reasons for the improvement are strong operating cash flows and an equity injection. Management is expected to fund future expansions prudently, therefore MINT’s leverage is expected to stay around 45%-55% for the next three years. MINT’s operating cash flow is solid. Funds from operations (FFO) rose from Bt1,000 million in 2003 to Bt1,700-Bt2,000 million in 2004-2006. However, MINT has reinvested most of the cash generated during the past three years mainly in the hotel business, TRIS Rating said.