MINT wrestles with liquidity and capital
Reduced cash sees the hospitality giant put off investment plans
SET-listed Minor International (MINT) is delaying new investment in all business units and shifting focus to cash management after the global health crisis forced the company to minimise cash outflow and come up with the biggest capital-raising plan in its history.
Chaiyapat Paitoon, chief strategy officer at MINT, told the Bangkok Post the capital is being raised based on a pessimistic scenario.
If the pandemic plagues the global economy longer than expected, the company would like to assure shareholders of a safety net created for that situation.
"This unprecedented funding strategy will help strengthen liquidity and flexibility given the long-term uncertainty," he said.
The plan to beef up the balance sheet using 25 billion baht consists of perpetual bonds (targeted for 10 billion baht), rights offering (10 billion baht) and warrants (5 billion baht) over the next three years, which are expected to reduce the debt-to-equity ratio to 1.3 times this year.
MINT also managed to keep its cash position by discussing a waiver of covenant testing with creditors for the next three quarters as the company has debts of 129 billion baht, while cash on hand at the end of April was 22.2 billion.
The company turns 51 years old this year and operates on three core businesses -- hospitality, restaurants and lifestyle brands distribution -- in 63 countries.
Despite being a giant in the Thai hospitality business with various business interests across the world, the far-reaching impact of the pandemic has been beyond everyone's expectations, including MINT, Mr Chaiyapat said.
In the first quarter, MINT posted total revenue of 22.4 billion baht, down by 22% year-on-year, with a net loss of 1.77 billion.
"The company will commit to diversification," he said.
"This ongoing outbreak is an exceptional event wreaking havoc across every geographical region and industry."
Mr Chaiyapat says the pandemic has had unexpected impacts across all sectors.
Mr Chaiyapat said the outlook in the second quarter is still vague as the company had to temporary close about 80-90% of its hospitality business, which contributes 70% of total revenue, and 30-40% of restaurants during April and May.
Under current circumstances, cost reduction plans for payroll, rentals, suppliers and other unnecessary costs have streamlined expenses by 25%.
Furthermore, this year's capital expenditure has been cut to 10 billion baht from 17-20 billion.
The hotel expansion plan calling for 72 hotels, designed for 2020-23, has been rescheduled.
He believes business diversification, especially from food and lifestyle segments, will continue to play a vital role in mitigating the impact.
During the lockdown period, food delivery services from well-known brands like The Pizza Company and Bonchon Chicken become more popular.
The hand sanitiser factory under the Minor Lifestyle segment also benefited from growing demand.
MINT also diversified hotels in different locations that serve both leisure, such as Thailand and the Maldives, and business in Europe, which should be ready to serve domestic travellers in its first phase of lockdown easing, said Mr Chaiyapat.
"MINT will benefit from the tourism rebound no matter which hotel segments start to pick up first," he said.
Mr Chaiyapat said the revival in China will be the model for the company's recovery pace as the situation on the mainland has almost returned to normalcy.
MINT's restaurant business on the mainland is projected to climb back to pre-pandemic levels around next month, while Thailand will see a full recovery as late as the third or fourth quarter, he said.
As the list of countries that are easing lockdown restrictions grows, 70-80% of Minor's 530 hotels in 55 countries are expected to reopen in the second half of this year, Mr Chaiyapat said.
He said 29 hotels located in Thailand are expected to open for 50-60% occupancy during the third and fourth quarters, dependent on government direction to ease lockdown measures, including allowing international flights.
Building value to enhance guests' experience, especially regarding safety and hygiene, rather than triggering price wars is the key to attract demand, especially from tourists to Thailand who can spend on travel as well as regional guests, said Mr Chaiyapat.