TRIS Rating Co., Ltd. has affirmed the company rating of Central Plaza Hotel PLC (CENTEL) at "A-". At the same time, TRIS Rating has assigned a "A-" rating to CENTEL's proposed up to Bt1,000 million senior debentures. The rating outlook remains "stable". The ratings reflect the proven record of CENTEL's 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 the QSR business, and the strong positions of the major hotels in its portfolio. The ratings also take into account support from the Central Group. However, these strengths are partially offset by the seasonal nature of the hotel industry which is sensitive to external factors and the highly-competitive and low-margin nature of the QSR industry. The proceeds of the debentures will primarily be used to refinance short-term debt and will also be used as working capital. Management's commitment to limit secured debt to total assets at acceptable level supports the issue to be rated the same as the company rating.
The "stable" outlook reflects the expectation that CENTEL will be able to maintain the strong positions of its major hotels and QSR brands. TRIS Rating expects that CENTEL will continue to expand its hotel and QSR businesses with an acceptable financial policy.
TRIS Rating reported that CENTEL, established by the Chirathivat family, has operated hotels since 1980 and entered the QSR business in 1994. Its portfolio currently covers eight hotels (1,759 rooms) located in major tourist destinations in Thailand, including a new Central Krabi Bay Resort. In the food business, CENTEL operates five international franchised QSR brands (KFC, Mister Donut, Pizza Hut, Baskin Robbins, and Auntie Anne's), and its QSR brand (Steak Hunter), with a total of 403 outlets nationwide.
Two of CENTEL's 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. The rest of the hotels are under CENTEL's own brand, Central, managed by CENTEL's hotel management team. Most of the Central hotel general managers have years of experience with international chains in the lodging business. Accor is one of the top ten hotel operators worldwide that provides effective reservation system networks, chain-wide advertising, and worldwide sales offices for CENTEL's properties under its management or franchise. The Central brand is well-recognized among high-end local hotel customers.
CENTEL is one of Thailand's largest QSR companies. Revenue from the food business grew strongly by 20% in 2004 and by 23% for the first eight months of 2005. KFC (53%) and Mister Donut (23%) were the major revenue contributors. The higher revenue is the result of both opening new outlets nationwide and growth of same store sales. In 2004 and the first eight months of 2005, the company's food business contributed approximately 60% of total revenue; however, in terms of cash flow, it contributed only 40% to earnings before interest, depreciation and amortization (EBITDA), while the rest was generated by the hotel business. Diverse sources of cash flow from hotels in various locations and multiple brands of QSR helps the company reduce business risks. In 2004 and during the first eight months of 2005, the performance of CENTEL's major hotels improved significantly. CENTEL's occupancy rate increased from 57.5% in 2003 to 65.5% in 2004 and to 67.5% during January to August 2005, and overall revenue per available room (RevPAR) increased from approximately Bt1,400 per night in 2003 to Bt1,700 and Bt1,900 in 2004 and during the first eight months of 2005, respectively.
CENTEL's debt increased from Bt1,717 million at the end of 2004 to Bt2,449 million at the end of June 2005. The company's adjusted total debt to capitalization ratio was 49.61% at the end of June 2005. The ratio is expected to increase further as large expansion projects are planned, especially in the hotel business. Future capital expenditure requirements during the next three years will result in CENTEL's leverage remaining high, even though these investments will be financed partially with new capital and partially through the use of cash flow from operations. In addition, as a result of the recent upward trend of interest rates, CENTEL is exposed to interest rate risk since most of its debts are at floating rates, said TRIS Rating. -- End
Central Plaza Hotel PLC (CENTEL) Company Rating: Affirmed at A- Issue Rating: Up to Bt1,000 million senior debentures due within 2 years A- Rating Outlook: Stable
The "stable" outlook reflects the expectation that CENTEL will be able to maintain the strong positions of its major hotels and QSR brands. TRIS Rating expects that CENTEL will continue to expand its hotel and QSR businesses with an acceptable financial policy.
TRIS Rating reported that CENTEL, established by the Chirathivat family, has operated hotels since 1980 and entered the QSR business in 1994. Its portfolio currently covers eight hotels (1,759 rooms) located in major tourist destinations in Thailand, including a new Central Krabi Bay Resort. In the food business, CENTEL operates five international franchised QSR brands (KFC, Mister Donut, Pizza Hut, Baskin Robbins, and Auntie Anne's), and its QSR brand (Steak Hunter), with a total of 403 outlets nationwide.
Two of CENTEL's 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. The rest of the hotels are under CENTEL's own brand, Central, managed by CENTEL's hotel management team. Most of the Central hotel general managers have years of experience with international chains in the lodging business. Accor is one of the top ten hotel operators worldwide that provides effective reservation system networks, chain-wide advertising, and worldwide sales offices for CENTEL's properties under its management or franchise. The Central brand is well-recognized among high-end local hotel customers.
CENTEL is one of Thailand's largest QSR companies. Revenue from the food business grew strongly by 20% in 2004 and by 23% for the first eight months of 2005. KFC (53%) and Mister Donut (23%) were the major revenue contributors. The higher revenue is the result of both opening new outlets nationwide and growth of same store sales. In 2004 and the first eight months of 2005, the company's food business contributed approximately 60% of total revenue; however, in terms of cash flow, it contributed only 40% to earnings before interest, depreciation and amortization (EBITDA), while the rest was generated by the hotel business. Diverse sources of cash flow from hotels in various locations and multiple brands of QSR helps the company reduce business risks. In 2004 and during the first eight months of 2005, the performance of CENTEL's major hotels improved significantly. CENTEL's occupancy rate increased from 57.5% in 2003 to 65.5% in 2004 and to 67.5% during January to August 2005, and overall revenue per available room (RevPAR) increased from approximately Bt1,400 per night in 2003 to Bt1,700 and Bt1,900 in 2004 and during the first eight months of 2005, respectively.
CENTEL's debt increased from Bt1,717 million at the end of 2004 to Bt2,449 million at the end of June 2005. The company's adjusted total debt to capitalization ratio was 49.61% at the end of June 2005. The ratio is expected to increase further as large expansion projects are planned, especially in the hotel business. Future capital expenditure requirements during the next three years will result in CENTEL's leverage remaining high, even though these investments will be financed partially with new capital and partially through the use of cash flow from operations. In addition, as a result of the recent upward trend of interest rates, CENTEL is exposed to interest rate risk since most of its debts are at floating rates, said TRIS Rating. -- End
Central Plaza Hotel PLC (CENTEL) Company Rating: Affirmed at A- Issue Rating: Up to Bt1,000 million senior debentures due within 2 years A- Rating Outlook: Stable