Bangkok--26 Sep--TRIS Rating TRIS Rating Co., Ltd. has assigned a “A” rating 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”. The rating outlook remains “stable”. 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 nature of the tourism industry which is highly sensitive to uncontrollable factors like political situations, 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 22 properties (2,790 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, Vietnam, Indonesia and Tanzania. 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 brands (The Pizza Company, The Coffee Club and Thai Express). At the end of June 2008, MFG had a total of 654 outlets and 310 sub-franchises located in Thailand and overseas. Revenue from hotel and QSR sales account for approximately 90% of MINT’s total revenue (hotel 40%, QSR 50%). Compared with 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, revenue grew by 16% to Bt7,836 million for the first half of 2008, compared with Bt6,567 million in the same period of 2007. For the owned hotel properties, MINT’s average revenue per available room (RevPAR) increased from Bt3,777 in the first half of 2007 to Bt4,177 in the same period of 2008. The rise in RevPAR was due to continued success of MINT’s newest hotel, which drove average room rate to increase by 11% in the first half of 2008. The food business has experienced slower performance in recent years due to intense competition and fewer new outlets. Same store sales contracted by 0.9% in 2007, but grew by 6.2% in the first half of 2008. TRIS Rating said, MINT has been actively investing in the QSR and hotel businesses, putting more than Bt2,000 million in both QSR and hotel businesses internationally during the past year. During the first half of 2008, the company acquired a 50% share of The Coffee Club (Bt666 million), an Australia-based coffee dining chain with 197 outlets, and a 70% share of Thai Express (Bt936 million), a Singapore-based Asian restaurant chains with 47 outlets. MINT also leased an island in the Maldives to open a new Anantara resort, and acquired a 50% stake in Elewana Afrika, a resort property developer in Tanzania (Bt400 million). 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, financial leverage has steadily improved. The debt to capitalization ratio decreased from 55% at the end of 2005 to 40% in June 2008 due to strong operating cash flows in both the hotel and food businesses. Management expects to fund future expansions through both borrowing and internal cash flow. The total debt to capitalization ratio 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 Bt1,911 million for the first half of 2008, compared with Bt2,900 million for the whole 2007. However, MINT has reinvested a substantial portion of the cash generated during the past three years into the hotel business. Therefore, total assets continued to increase from Bt21,280 million at the end of 2007 to Bt25,196 million at the end of June 2008.