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Edited Transcript of MINT.BK earnings conference call or presentation 19-Aug-19 10:59am GMT

Q2 2019 Minor International PCL Earnings Presentation

Bangkok Sep 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Minor International PCL earnings conference call or presentation Monday, August 19, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Emmanuel Jude Dillipraj Rajakarier

Minor Hotel Group Limited - CEO and Member of The Board of Directors

* Paul Charles Kenny

Minor International Public Company Limited - Director

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Conference Call Participants

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* Thaniya Kevalee

Crédit Suisse AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to Minor International's Midyear Analyst Meeting. It is my pleasure to introduce the presentation, in which you will hear from Mr. Dillip Rajakarier, the COO of Minor International and CEO of Minor Hotels. And also here together with us today, Mr. Paul Kenny, CEO of Minor Food. Joining Mr. Dillip and Mr. Paul during Q&A are Mr. Brian Delaney, Corporate CFO; Mr. Chaiyapat Paitoon, Deputy Corporate CFO and Strategic Planning; and Mrs. Jutatip Adulbhan, Vice President of Investor Relations. After the presentation, we will open the floor for Q&A session.

Now I would like to hand over to Mr. Dillip for the presentation.

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [2]

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Good morning all. So here today, we're here to present both Q1 and Q2, and also the year-to-date numbers for Minor International.

The agenda item is pretty much going through Q1, Q2 performance recap; Minor Hotels, the performance; Minor Food, which will be presented by Mr. Paul Kenny; and then Minor Lifestyle; and then the Minor corporate or corporate information, which will be the overarching for the whole group as well.

So just a performance recap for the full year, year-to-date numbers. Before we actually dive into these numbers, I would just like to point out, as you know, Q2 -- Q1, Q2, our year-to-date performance has been another record year. And mainly also driven by the acquisition of NH Hotels. And just some key data points, NH has been performing very well or very strong compared to their concept. And predominantly, NH has a low quarter 1 because their quarter 1 is always a loss-making quarter because that's their lowest quarter in Europe and South America. Quarter 2 starts to ramp up. Quarter 3 ramps up as well. And then quarter 4, sort of slightly reduces from Q2 and Q3.

So so far, their performance in the marketplace, Q1, their losses were much lower than last year, so -- which was quite positive for us. Q2, in spite of all the concerns and whatever was happening in Europe, their performance compared to their concept has been much stronger. And Q2, their numbers is also much higher than last year as well. So -- which was quite satisfying for us because we've just taken over NH. As you know, the deal was completed last year in October. We have started to consolidate our numbers in Q1 and Q2. And therefore, it's actually been very positive for us. And compared to their market set, they were the only one who were showing a positive RevPAR growth of 4.5% in Q2 compared to the others in their marketplace or their concept, which was showing a negative RevPAR growth. So we are in a strong spot there.

Q3 and Q4 also looks quite good because they are able to foresee or predict their numbers. The advantage being most of the NH Hotels, as you know, are in key urban cities. So I think from a performance perspective, it's been quite strong.

So -- and then we come to Thailand. So just as a recap, we've just released our numbers for Minor International last week. Thailand, on the hotel side, we have shown quite a strong growth compared to our concept. And compared to some of our competitors in Thailand, our profits compared to last year was up 4x or 380%. So that's a big increase for us.

And then on the food group, it's been a little bit soft. So the performance has been not so good as what one would have expected. So we are lower than last year. But then the food group has performed really well in China.

China is looking very strong for us. So China is starting to really produce the numbers and be very profitable for us. Australia has been has been impacted with the currency because we have a 8% swing on the Australian dollar because the Thai baht being very strong. Thai baht is also in terms of euros, we've taken a 6% to 7% impact on ForEx as well, in terms of Thai baht. So when we convert euros to Thai baht, we have a drop of about 7% or 8%.

And then Minor Retail has also been a little bit soft because of the predominantly all Minor retail is pretty much present in Thailand. So they've been soft. But on an overall picture, when you compare Minor retail, it's so small now today to the whole group. So the impact is not that significant. So that's where we are as a summary.

And then on a big picture, as you know, just to recap, we, as part of our debt deleveraging process, we completed the sale and leaseback of our Portuguese properties, which we did announce in end of June. The settlement has been done -- was done in July. So the numbers have not been reflected in our Q1 or Q2 numbers. Even though they are noncore, we have a very strong story. And the story is that, as we all know, we acquired 14 hotels in Portugal just under 3 years ago for EUR 294 million. We, then, renovated the hotels. We've renovated them, refurbished them. And we've, not only done that, we've also doubled the EBITDA in the last 3 years, so which is quite strong for us. And on that basis, we, then, sold 3 hotels in Portugal for EUR 317 million. So we pretty much recovered all our investment and paid down the debt on those assets.

So that's a very positive story for us from asset recycling process. And we sold these assets at close to 20x EBITDA multiple, which is also quite strong as well. But the good thing is we have not only sold the assets at a high price, we've also leased them back and kept it for the next 60 years at a cap of 4.5%. So -- and because of the new IFRS coming in, we have also managed to reduce our -- we created a minimum lease basket of 2 years. So our lease, which comes on our balance sheet, is only 2 years instead of 60 years of lease liability coming on our balance sheet. And we keep 75%, close to 75% of the EBITDA from these hotels for the next 60 years, and that would be increasing as well.

So I think not only the asset recycling was done at a good price, also we managed to keep the assets and we managed to retain the EBITDA for the next 60 years, and we have retained about 75% of the EBITDA. So that's a strong positive story for us. And those numbers will be reflected in Q3.

The other one is like, we are also looking at, at the moment, as part of our debt restructure or debt deleveraging process, we all understand there were some concerns about our D/E ratio last year when we acquired the NH Hotels at EUR 2.3 billion or USD 3 billion. But I think one of the things which we forget is that just the asset value of these NH Hotels, which we have established today, 80 hotels are owned by NH, and just the asset value of those 80 hotels are about EUR 2.2 billion. The EUR 2.2 billion of 80 hotels generate about EUR 100 million of EBITDA. And there's another EUR 150-plus million EBITDA, which is generated by the managed -- which is generated by lease assets. And in Europe, the lease structure is quite normal. And it's the most common way to acquire assets and to drive growth as well. So these assets actually produce about EUR 150 million of EBITDA, and that's not reflected anywhere in our earnings or in our balance sheet -- in our numbers because we actually acquired the NH Hotels at pretty much asset value. So that's a big upside. And hopefully, like what we see is those assets are now starting to leverage up. And as you know, NH actually produced a record year last year. They produce about EUR 263 million of EBITDA for the full year. And this year, they are set on target to also further increase their EBITDA this year, so which will be much higher than last year were. And so far, it's looking strong. Q1, as I said, has come out better than last year, Q2 is much stronger than last year and Q3 also looks good. And Q4, based on what we have on the books, is looking good as well.

So basically, as part of our, as I said, the debt to EBITDA -- Sorry, the debt-to-equity ratio, we rose up to 1.55%, which was even though it was below our external covenant, which is 1.7x. Our internal covenant is 1.3x. So we've been trying to reduce that debt-to-equity. And by the end of this year, I can say that it will be back to 1.3%., our debt-to-equity will be back to 1.3%. And because of the asset recycling, what we are doing, what we have accomplished in Portugal, and also there's some more to come in Q3 and Q4 as well. So that will further reduce our equity debt as well.

So those are -- that's pretty much the positive spin on the performance and giving you an overall picture. And also the fact that the integration between NH and Minor is going really well. And the reason is that -- one of the good things is, we have acquired a strong management team, who have been performing really well. And actually, I just returned from a trip in South America visiting all their hotels, and we've got some fantastic hotels in great locations. And there is a lot of potential. So hopefully, in the coming years, you will see that the performance will be much stronger compared to what NH is performing today.

As part of our integration process, we've also managed to open a new Anantara. We launched new Anantara in Marbella, in Spain. As you all know, it opened on the 1st of July. It's considered as the best hotel in Marbella. In the old days, it used to be old Ritz-Carlton. So it used to be a Ritz-Carlton hotel, where we've managed to rebrand that to Anantara as well. And that is being managed. So all our hotels in Europe, the Anantara brand also will be managed under the NH platform, together with the guidance from here, from corporate as well. The Tivoli hotels have been also shifted to be managed by NH as well. So basically, what we are doing is we are creating a structure, which is going to be much more efficient and much more fast in terms of getting performance and driving growth and sales and all those. So I think -- so from that perspective, the integration has gone really well.

Our next stage of integration is that we are planning to launch what we call a one loyalty program brand because NH has what we call NH Rewards, Minor or the Anantaras today, we are part of GHA, or Global Hotel Alliance, where we've got about 600 hotels, we've got about 10 million customers. NH Rewards has about 10 million customers. But then what we are trying to do is we are trying to create 1 platform, which will allow in NH guests and our guests to start to use each other for the hotels either way.

The bookings have -- we managed to already increase our bookings in NH from customer segments from Asia. Especially, we have driven our China market into NH. So as you know, the European travelers, the Asians going to Europe is about 8%. And out of 8%, NH used to get only 1% of that. This year, that 1% has gone up, and our goal is to increase that, to keep increasing that 1% through our distribution channel and through connecting our context or our key relationship partners to the NH and also driving that. Ctrip has been a very successful connection so far with NH, and we are progressing with the others as well.

We've increased the Middle Eastern market also into NH Hotels. So that's another market, which is now new going into Europe and South America as well. So I think -- so like -- so the integration plan is going ahead of schedule from where we actually plan. So which we are very comfortable and very happy as well.

So that's the overall story, I just want to summarize it, so before we actually dive into some of the detailed numbers. So now when we go into the detailed numbers, as you can see, revenue, the first -- the second half, when you look at it, we've gone from THB 15 billion to THB 16 billion -- sorry, to THB 31 billion. And that's a growth of 110%, predominantly driven by NH. Out of that, THB 16 billion is NH. Minor Food, as you know, as I said, was down, predominantly driven by Thailand. Minor Lifestyle is up. Minor Hotels, pre-NH is up, and there were some noncore items, which we've also taken out just to show the core revenue increase as well. So that's 110% growth compared to Q2 of last year.

We then go to net profit. So the net profit grew from THB 1.2 billion reported last year to THB 2.1 billion, which is a 94% growth. Out of which, THB 1.2 billion was coming from NH as well. And then you have Minor Hotels, pre-NH, is showing negative there. And the main reason it's negative is because when you look at our MD&A, you would have seen that it's pretty much the negative numbers are coming mainly from our residential or what we call mixed-use. And mixed-use is, as we all know, it's a timing difference. So basically, mixed-use has moved from Q2 to Q3 and Q4. So the mixed-use numbers will come through when we look at the full year. So we're not worried about that.

But if you look at -- if you take out -- if you eliminate mixed-use from that number, actually the Minor Hotels have increased. Their profits were up almost 4x compared -- or 380% compared to last year, the same quarter. And then we have noncore items of THB 315 million, which allow -- brings us to the reported of THB 1.7 billion. So that's where we are for Q2.

So as we all know, just to highlight, NH showed a double-digit growth, mainly because of the consolidation coming into Minor Hotel -- Minor as well. But also they have their peak quarter starts in Q2 as well. Now if you look at the -- so that's the Q2 performance. And the breakdown of Q2: Minor Hotels contribute 78% of the revenue, mainly driven by NH; Minor Lifestyle is 3%; and Minor Food is 19%. If you look at net profit, Minor Hotels contribute 87%; Minor Food is 13%; and Minor Lifestyle is 0.3%.

So here, you can see that our diversification strategy is working really well, and it's really paying off as well. So MINT or Minor international today is well-diversified over 60 countries in the world. And we're pretty much through that diversification. Yes, of course, there are some challenges because we are in some countries where there is a foreign exchange risk, but we actually managed to mitigate those risks with the matching concept, and we've not -- we've been controlling that. But then we are able to take some of the softness in some of the markets as well.

So for example, Thailand, even though we have done really well in Thailand, and in the numbers here, if I then exclude the third-party managed hotels in Thailand, for Minor Hotels, our number is much stronger. Because our third party, as you all know, our third-party managed hotels are Four Seasons. So we have 3 Four Seasons and we have a JW Marriott in Phuket. The performance of those hotels have been weak and has been below last year. Even though Minor Hotels, the performance has been stronger. So when we eliminate the third-party managed hotels, our story with our own brands is much more compelling and is much more stronger as well. So that's the Q2 performance.

We then look at the first half year. So first half year, we show like revenue growth, of course, is showing a 94% increase, and that's mainly THB 28 million of that of the THB 60 million is coming from NH, and then the balance is coming from our core. So if you look at it, the core items are like Minor Food was slightly down, Minor Lifestyle is up and then the core is up by about THB 31 million. So that gives us an increase of 94% increase on revenue in the first half of the year.

Now how does that convert to profit? So net profit, as I said, Q1 is mainly -- our year-to-date net profit is showing a negative 2%, and that's mainly driven by NH Q1. So last year, we did not have NH Q1. This year, we have NH Q1, which made a loss of close to about THB 1 billion. So therefore, when you actually factor those numbers, year-to-date, we are showing a negative 2% on the core numbers. But I think when you look at Q3 numbers, our performance is going to be much stronger. Our year-to-date profit is going to be much higher, considering the fact of the core items, plus the noncore of the sale of the Portuguese hotels will be also reflected in our Q3 numbers, which is going to be another record quarter for us in Q3 as well. So that's -- at the moment, those numbers are not reflected here.

So Minor Hotels contribute about 72% of the profits, Minor Food is about 27% and Minor Lifestyle is 1%. So that's for full year, okay?

On the operational performance improvement. I think we talked about some of the -- on a like-for-like basis. So here, what we have done is we are going to walk you through on a like-for-like basis, if, for example, NH was in our numbers in Q1 last year, which is not in our reporting pack. We couldn't highlight it because we didn't have NH last year. But what we have done is we are showing this on a like-for-like basis. So on a like-for-like basis, if I dive in straight into the revenue numbers, on a like-for-like, our net profit, including NH, is about -- it was up 3% for the first 6 months. And that's including the NH numbers, which is on a like-for-like basis. Our net profit is up 9% on a like-for-like basis.

So as I showed you before on the slide, year-to-date, we were showing a negative 2% year-to-date. But that was excluding NH last year, first quarter. On a like-for-like, we are showing a 9% increase. So our profit is up actually if we had included NH last year in Q1 as well. So it's up by 9%.

So that's pretty much what we want to clarify. And I'm sure, so that the audience and for the investors, they can clearly see the success story of the Minor International as a company. And again, as I said, this doesn't include our profit of the Tivoli hotels, which was close to about EUR 64 million, which is another THB 2 billion or THB 2.1 billion profit, which is not included in these numbers. So it will be included in Q3.

Okay. As you know, like this is our target. So in 2008, our international presence was 87% was Thailand and 13% was international. Today, through our diversification strategy, that has completely changed. So we are 72% -- or we are forecasting by 2023, our target is to have about 70% coming from international and 30% from Thailand. As at Q -- as at the first half of the year, we are 74% international and 26% Thailand. So we pretty much reached our target. But that doesn't mean that Minor will stop expanding in Thailand. We have quite a few projects going on in Thailand. The full group has a lot of potential to grow in Thailand as well. So that will continue to happen. We'll look -- there are new brands coming. We're looking at acquisitions. So I think those things will further help as well. But I think the important stuff -- the important thing to note is that the diversification strategy has been executed, and it's working well.

Okay. We then go into Minor Hotels. So I think I don't want to repeat myself. Like what I said in the Slide 1, but as you can see, the change in revenue and EBITDA compared to 2018 was mainly from the consolidation of NH Hotels, revenue in Thai baht has gone up 168% for the first half of the year. I don't think you should expect this kind of growth every single quarter because it's mainly because of the consolidation of NH numbers here. Our profits, our EBITDA has also gone up by 100% compared to last year first quarter. And also net profit has gone up by 6% as well.

Now one of the things which stands out is the EBITDA margin, right? So when you look at EBITDA margin for the first half of 2018, our EBITDA margin was 24%, and the first half of 2019, our EBITDA margin is 18%. Why? Because the first half of 2018, we didn't have NH. And in the second half, we only disclosed the revenue from dividend income, which came into NH. So of course, that kicked the EBITDA margin very high in Q1 last year. So it was an exception. And it was reported as -- it was reported that way. This year, we don't have. So this year, we've consolidated NH. And when we consolidate NH, the -- when you compare NH EBITDA margin to Minor Hotels EBITDA margin, predominantly because they operate in Europe, they have some leases and all those, their EBITDA margin is lower than Minor Hotels. So that's the reason when you look at year-to-date, actually, our EBITDA margin is lower compared to last year. And last year, we had an exception because of the dividend income.

Looking at net profit. Net profit is up 6% for the hotel group. And if you look at Q1 last year, we showed THB 1.1 billion. Q1 this year, we showed THB 128 million, and that was also mainly because of we had the NH loss there. And then when you have a look at Q2 compared to Q2 last year, we were THB 700 million, and this year, we're showing THB 1.8 billion.

And then this side, on the right-hand side, is a split of NH. So you can see Minor Hotels pre-NH, NH and then how the waterfall actually happens. So first half of '18, for example, if you take revenue, we were THB 17 billion, Minor Hotels pre-NH for the first half is down by THB 184 million, and that was mainly driven by our third-party managed hotels, which were mainly the Four Seasons and the JW Marriott in Phuket and the timing on the residential sales. And then the NH was THB 28 billion, which came up to 45%.

Net profit, Minor, for the first half, was 1.8% last year. Minor Hotels pre-NH, excluding NH, is negative THB 186 million. Again, the same reasons, third-party assets and the timing of residential sales. NH was up THB 293 million, which comes to THB 1.953 billion. So that's the waterfall on the split of the revenues, which is much more clearer to look at when you look at the slide on the right-hand side. Okay.

So organic performance, as I said before, in terms of our organic performance, our owned hotels, 23% of our income. Revenue is slightly down by negative 1%. EBITDA is minus 11% or it's THB 3.4 billion, and then net profit was THB 1.145 billion, which is negative 11%. And the reason is that, as I said, the residential, the timing on the residential, and also the Anantara Vacation Club has been soft in Q1 and Q2. Q3 and Q4 has a turnaround, which you will see in the numbers coming in the next 2 quarters. But Q1 and Q2 has been soft for us.

Owned hotels. So the revenue, excluding NH, grew by 2% and mainly because of the strong performance in Portugal, Brazil, Maldives and Africa, which helped to offset some of the soft performance in Thailand, which are also mainly driven from the third-party managed hotels like the Four Seasons and the JW Marriott. So -- but excluding the third-party hotels, our revenue actually grew by 6% compared to last year for the -- from our organic performance. So Minor Hotels, excluding the third-party managed hotels, actually, the revenues grew by 6%. Okay.

Next. Now we then look at Minor Hotels and NH Group performance here. So here, what we have done is we've included the numbers. The key highlights, the RevPAR for NH was, as I said before, was up by 4.7% for the quarter, which has been very strong, and the occupancy was also slightly up by 0.1%, mainly the RevPAR growth was mainly driven by ADR growth, which is what we want. So for us, it's all about driving earnings and driving sort of the rate as well. So that's what we managed to do in the -- for NH as well.

Recurring EBITDA, actually -- when you look at the recurring EBITDA, actually, it's a great story like, Q -- last year, Q2, EUR 99 million, and that was excluding IFRS, was EUR 110 million. So the first half of 2018 was EUR 115 million and the first half of 2019 was EUR 131 million, so shows a 14% growth. And then net profit here, if you look at net profit, it's showing a negative 29%. And the main reason of that is because, last year, NH Hotels had the asset sale and leaseback of the hotel in Amsterdam. So those numbers are included in the last year, which is -- so there was nothing this year. So actually, if you actually take it out. As I said, the first half of 2018 had EUR 57 million, which was mainly from the asset sale and leaseback of the Barbizon Palace in Amsterdam. So that is included in the numbers there. So that -- if you strip that out, actually, NH performance has been very strong for the first half of the year. Okay.

This slide actually shows where we are present today. So today, for the hotel group -- we are present in 54 countries for the hotel group. So here, you can see where we have invested, where we have management, where we have a combination of the 2. And then we have some new pipelines coming in. Our pipeline is also now becoming stronger. And then also where we have our hubs, which actually control now our businesses in the different regions as well.

Our revenue contribution international on the hotel side is 89%, and the Thailand is 11%. That's our target. But if you look at first half of the year, we are almost there. We are 87% international and 13% Thailand. So this is for the first half of the year. And as you know, Thailand has a low quarter in the second quarter. Our highest quarter is Q1 and Q4. So Q1 -- but NH, it's the reverse because NH has a low quarter in Q1 and the highest quarter in Q2. So it's the reverse. So for us, now we start to synchronize our earnings pattern much more on a constant basis rather than having the spikes because in the old days, before the acquisition, we had Q1 high, Q2 down, Q3 slightly down and Q4, high. But now it will be much more symmetric and much more synchronized as well with NH coming in.

Okay. System-wide hotel portfolio. So today, last year, as you know, we had 20,000-odd rooms. We're now up to 75,000 rooms. Our occupancy on an organic has grown by 1%. Organic, excluding ForEx, RevPAR has grown 6% and ADR has grown by 4%, excluding FX.

So here, I think when you look at the number of hotels, Minor Hotels has actually -- last year, we were at about 70 in the ranking of the biggest hotels in the world. Today, we are about close to that in the 20s or 22 in terms of ranking. So we've made a big head in terms of gaining a much bigger momentum. And to be -- and today, being in Thailand, to be considered as one of the largest global hotel companies in the world.

What does it do? It brings us so many advantages. Because today, like NH Hotels is able to also offer Minor Hotels brands to grow in Europe and South America. Because NH is very strong, has very strong distribution, has very strong people and they are able to grow the brand for us in these countries.

What is it for us? We have another brand called NH, which we can now grow in Asia, Middle East, Africa, including China and other places as well. So it's a great story for us. And being one of the largest global hotel companies in the world, it puts us right up in the scale where people actually look at us. And from an investor's perspective, and when we actually did the sale process for Tivoli, we actually -- we were quite lucky because we were able to attract international investors, not just domestic or not just regional investors. We were able to attract international investors. So about 9 of the investors participated in the bidding process, we have all international funds and we were able to do a deal with one of them, whom we've done the sale, which was completed last month.

So now we have much more traction in terms of international investors as well, which will enable us to also do a further asset recycling as to what we have done, like NH did the asset in Barbizon, as I said to you, last year. We have done Tivoli. We have few more to go. So that will then further reduce our debt moving forward. Okay.

And then we looked at owned and leased hotels. So owned hotels, we have gone from 7,000 rooms to 53,000 rooms. Occupancy, as I said, on an organic basis, have grown up by 4%; system-wide is plus 10%; RevPAR growth is 12%; and system-wide is negative 14%. Organic, excluding ForEx, is up by 7% ADR. So that's how on the system, on the owned hotels and the leased hotels, how our performance has been. So again, it's mainly -- some of the dilution is mainly because of the NH mix. But I think, as you know, it will get -- we are looking to reverse it. And the revenues of the owned and leased hotels, as I said before, has more than tripled, or almost 4x compared to last year for Minor Hotels in the second quarter.

Okay. Then we come to owned hotels, Thailand. So owned hotels, Thailand, as you can see, our organic RevPAR grew by 9%. And in the Thailand provinces, our organic RevPAR actually declined by 7%. So 9% Bangkok has been quite strong. Reporting positive RevPAR growth. Thailand provinces declined by 7%, both in terms of low occupancy and ADR. But our Anantara and Golden Triangle showed a positive RevPAR growth. Samui has been a little bit challenging for us. So Samui has actually driven our numbers down. And that's where the key drivers are coming from.

The Thailand hotels, as you can see here, international tourists arrivals into Thailand grew by 1.1%. The number of room nights, we were flat. And also as we all know, the first quarter we had -- or the first half of the year, we've had some challenges. We've had a little bit of not knowing what was happening on the political situation, we had the China trade war happening, we had Brexit -- concern about Brexit, and the biggest concern we have, the main driver here in terms of Thailand, is our currency, Thai baht, is too strong. So today, the Thai baht is very strong. And the reason why it's negative for us is we -- when we have international tourists actually coming to Thailand, Thailand as a destination is becoming much more expensive. The Thai baht to the pound or the sterling GBP is now trading at about THB 37. The Thai baht to the dollar is about THB 31. So it's too strong. And what's happening? Most of the tourists are now going into other places, like we see it because we have hotels outside Thailand. So the demand is driven into places like Vietnam, Cambodia, Laos, Myanmar and other places. So Thailand is actually losing its demand because of the strengthening of the Thai baht. That's the main driver. So that is our key challenge, and that's been the challenge for the first 2 quarters of this year.

Okay. We look at Thailand Overseas Hotels. So Thailand overseas, our story is much more stronger. So our overseas, excluding NH here, RevPAR grew by 10%. And as I said, Portugal is still on the up. Our RevPAR was 8% up. And in euros, it was up by 16%. So which means the currency impact of euros to Thai baht is 8%. So as I said, when we convert our numbers to euros to Thai baht, we drop by another 8%. But the actual growth in euros was 16%. So Europe is -- Portugal is still very, very strong. Brazil also continues to be strong. So we've managed to increase our RevPAR by 18%. And in Brazilian reals, which is the local currency, it's up by 29%. So the RevPAR is very strong. The growth is almost 30%.

Maldives, again, Maldives has been strong for us. Our RevPAR actually increased by 19%, both in Thai baht and U.S. dollars. And this is us mainly focusing on ADR.

And then you have Africa, which actually RevPAR increased by 8%. And actually, in local currencies, it increased by 35%. So again, Africa is becoming -- is turning around, and it's becoming quite positive for us. So when we then benchmark this today because we've had many of the Thai hotel companies who've released their numbers in the last week or so when we compare what we have done in Thailand, us, I think we were the only hotel group which was showing a very strong positive growth in Thailand. So our performance compared to the market, even though the market is soft, we've been able to demonstrate positive sales growth.

And then we come to the owned and leased hotels of NH. So here, RevPAR, as I said, it's 6% year-on-year. As you can see, the occupancies grew 6% and the RevPAR grew by 5%. This is what we were saying in the early slides as well. The growth of EBITDA or the growth in terms of the organic growth, you can see how it's been illustrated. Madrid showed a very strong performance. And we were quite lucky because we also had the Champions League in Madrid, which was great. So all our hotels were not only full, they were full at a very high rate. So we were able to really drive our rate in Spain.

Italy continues to perform well. Brussels, the recovery continues. Central Europe also like Munich and Vietnam had double-digit RevPAR growth. But Frankfurt was actually impacted by higher supply, which actually drove a slightly negative growth for us in Frankfurt. Latin -- Lat Am has been strong. As I said before, again, Buenos Aires and Bogota in Colombia is showing quite positive RevPAR growth as well.

Okay. Then here, we look at -- we haven't actually mentioned compare B and C, but these are some of the top competitors which NH has in Europe. So today, NH is considered as the third largest European hotel brand in Europe. And they compete today, NH actually competes with Meliá because Meliá is another big Spanish group. They compete with Accor. They compete with Radisson and also to a certain extent, they compete with Marriott well.

So how did we perform against the concept? Our occupancy was up -- was 71%, which was one of the highest. But the biggest one was our RevPAR growth. Our RevPAR growth is 4.5% compared to the comp set of 0.8%, 0.8% and 2.9%. So our RevPAR, like we were able to drive rate in our hotels. Our EBITDA margin that has actually improved by 1.3 basis points compared to our comp set. And then our ADR actually increased by 3.8% compared to comp set as well. So that's pretty much giving you some flavor in terms of how NH has been performing in the first half of the year against its comp set.

First half, the first 3 months is low quarter. The second 3 months, the peak quarter starts. And then the Q3 and Q4. Sorry, the Q2 and Q3 are the peak quarters, and then Q3 starts to soften a little bit -- sorry, Q4 starts to soften a little bit. So Q2 and Q3 is their peak quarters.

Okay. I think I've gone through this, the story here. So the NH integration and the synergies update. So one is we managed to do across the expansion. As I said before, we managed to take the Anantara brand to Spain as well. So we have, today, we have 2 Anantaras in Spain. We're hoping to have more by end of this year. I really hope we will have at least 6 or 7 Anantaras before the end of the year. So we're working really hard to get them. And the good thing is some of this -- the funds, as I said to you before, who are acquiring some key trophy assets, they need strong management, but not only strong management, a strong brand as well. So when it comes to a strong brand, we are able to put our hands up today and get those brands under the Anantara brand because we already have the infrastructure in Europe which can support it. So that's the reason why Invesco, when they bought the 3 hotels in Portugal, they were so confident that we were able to manage it back as well or lease it back also. So we were quite lucky there.

So on this side, as I said, we sold 3 hotels in Portugal for on a sale and leaseback up to 60 years, with a minimum basket. So we manage 9 hotels in Portugal today, and NH will manage the hotels for Minor now or MINT. So we passed the Tivoli Hotels under NH, which will be much better because they have the infrastructure and the systems and the people to manage it rather than us trying to manage it from here. So 2 -- and then we still have 2 hotels in Brazil. So NH will, again, support. And as I said before, the sale and leaseback of the hotels, we were able to retain 75% of the EBITDA going forward. So 25% of the EBITDA, 25%-plus of the EBITDA goes towards the lease rent.

The management letting rights, pretty much the Oaks model. Again, the number of rooms increased by 7%. Our ADR in Aussie dollars dropped by negative 1%. Because, again, Australia had some concerns, elections, well, this year, as you all know. So during an election year, things start to slow down. And that's what we have noticed in Australia. So again, this year, like there were elections, so things did start to slow down. So which drew -- which grew the actually the ADR by about 1%, but our RevPAR was down by 4% because occupancy was also down by 2%. I think rest of the year for Australia, it would be cruising along the same lines. But I think where we see the growth for Australia is kicking in next year. So this year it's going to be almost the same.

Managed hotels. So Minor today, 2% of our revenue is contributed from our management contracts. Our hotels, the number of rooms actually increased from 4,000 to 13,000. Our system-wide occupancy increased by 1%. This is a ramp-up year for some of the hotels, which we took management as well. Our ADR, actually organic ADR, excluding ForEx, was up by 5%. And the organic RevPAR, excluding ForEx, was up by 9%. So that's pretty much on the managed hotels.

Okay. This is our pipeline. So again, under the pipeline, we have 24 hotels today under, what we call, investment or joint venture under the different brands, opening in different periods. So these are just -- these are not just pipeline. These are signed management contracts. So we do not disclose pipeline because what we disclose here compared to some of the other hotels, they disclose pipeline, which means our numbers will be about 150. But we only disclose [mat] signed hotels. So these are just signed deals and signed management contracts.

So under the management contracts, we have 62 hotels, about close to 12,000 rooms coming in the next few years under the different brands, under Anantara, AVANI, Tivoli, Oaks, NH Collection, NH, nhow and Elewana. So these are the 8 brands which we own, and that's the pipeline which we have for the next 4 years. Again, as I said, these are just signed management contracts.

On the residential side, so these are the projects we have on the residential side. We have Layan, which we have 15 pool villas; Avadina Hills, we are building 16 pool villas, which would be starting to sell from next year; Samui Estates, we have 14; Anantara Chiang Mai, we have 44; and Torres Rani in Maputo, in Mozambique, we have 181 keys for rent and we have 6 penthouses for sale.

And we also own a 21-story office tower. So it's a twin tower with Radisson Hotel as well, which is the third tower, which we own 49%. And then we have also the 20 residential villas in Desaru. So Desaru will open this year as Anantara Hotel, and then we have some residences for sale, which is about 20 villas. Then we have Anantara Ubud residential villas opening next year, and the launch will be like next year. Silom, the office complex, the launch is 2023. This is the office building here in Thailand. So mixed-use, Anantara Vacation Club, as I said before, the first 2 quarters has been soft. Our members have gone up from 6,900 to 13,200. Inventory, growth is also -- our target is to get to about more than 12 destinations with more than 500 units, which we are working towards. And as I said, the members are fairly widespread. Of course, China dominates the chart by about 38%. So this is as of June 2019. So here, as I said, our -- the sales and profits for the first 2 quarters of AVC was soft. We see Q3 and Q4 up. I just looked at the July numbers. Our July numbers were above budget, and also above last year as well, which is quite -- which indicates that it is starting to turn around, and it's looking quite strong.

Okay. So that's Minor, the growth story, the company as a whole and Minor Hotels. And then I'll hand you over to Mr. Paul Kenny, and then I'll be back for Minor Retail or Lifestyle. And then the corporate stuff. And then maybe we take the Q&A at the end. Okay. Thanks very much.

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Paul Charles Kenny, Minor International Public Company Limited - Director [3]

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Thank you, Dillip. Okay, get started into Minor Food. Hopefully, everybody understands that, that picture there represents the vendor box that you can have delivered to your office or at home.

So first off, we'll just get straight into the financial highlights. On the revenue side, we saw year-on-year growth of 3% for the first half of the year. The total system sales growth was positive 4.5%. This was from outlet expansion, predominantly in China and in Thailand. EBITDA year-on-year declined by 2%, and net profit by 17%. The improved profit performances of the Australian and the China hubs were offset by declining profits from Thailand. Thailand margins were under pressure from negative same-store sales growth, and the costs associated with strengthening our digital capabilities, both in terms of systems and management capabilities. And this is to ensure that we have the marketing and digital know-how to deal with a highly competitive marketplace. And I think I should spend a little bit of time explaining that. As the world has changed, digital applications and the use of digital technology, I don't have to tell anybody in this room, is becoming part of everybody's lifestyles. But when a company launches into the digital realm, it comes at a cost. It comes because you need capable people and capable software systems. We have now appointed a Chief Digital Officer. He actually was employed by as the Head of Digital for HSBC Bank worldwide. So we're bringing in the correct capabilities at the right levels and then building teams to be able to take control of our own digital destiny. But as I said, this does come at a cost.

Our outlet expansion for the first half was 6%. In the last 12 months, the system expanded by 138 units, giving us a total of 2,268 outlets. Outlet expansion is still part of the strategic requirements to keep presence in the marketplaces to cope with the changing demographics. I've had quite a few people ask me, why do you continue to open units where you have negative sales growth? And the answer to that is that you need to keep a presence. The demographics change, shopping centers change, the environment changes, where people live, it changes, and with the advent of delivery becoming part of everybody's lifestyle, we need to make sure that we've got delivery units that can take advantage of where people live and get the food to them quickly and hot where required.

The same-store sales growth for China has been positive in the first half. However, it still could not offset the negative same-store sales growth in the Australian and the Thailand hubs, as I've just mentioned, who, as we all know, are experiencing some macro conditions in Thailand, in particular. Overall, the group was negative 3.6% in the first half. And I'll go further into more detail as I go further through the presentation.

Our international presence, MINT continues to operate 3 restaurant hubs in Thailand, China and Australia. We now have presence in 27 countries. This is made up of operated and owned, franchised and a combination of both. And we still continue to look for opportunities for expansion in the existing markets and for new markets and new brands. Our revenue flow is still predominantly from Thailand Hub at 64%. As far as the operational performance, the system sales growth was at 3.8% for the second quarter. This was mainly driven by the selective outlet openings, as I've just mentioned, mainly in China and Thailand, and along with the developing hubs. A good example of the developing hub would be -- or developing market would be Vietnam, where we now are represented by 3 brands with 93 units. Vietnam is becoming a more and more important part of the portfolio. Today, our total unit portfolio is at 50-50: company-operated and franchise operated.

Then if we get into Thailand, Thailand domestic operations account for 60% of the revenue for the first half of 2019. The same store sales declined by 5.6% in the second quarter. Consumer confidence is still challenging. However, this was a small gain from the first quarter. The Bangkok marketplace is continuing to be affected by a changing consumer patterns, as I've just mentioned before. Their increased usage of delivery services for both goods and food being delivered to the office and to home is still continuing to grow. Thailand still continues to selectively open new units, as I mentioned before, we must do this to make sure that we've got the outlets in the correct places, and they are the correct application for that marketplace. In other words, we may be building smaller units in areas that are closer to where people live. And the delcos with seats with the Pizza Company is a very good example of that. Our outlet expansion in Thailand was 9%, but our total growth as a system was only 0.8%.

More importantly, going forward in Thailand. We are continuing to give customers open accessibility through digital and physical channels. And what I mean by that is that if we look at the marketplace of Thailand today, you have shopping centers, prolific, pretty well every area of the city. We have delivery systems, in other words, the Gets, the Grab operators, Food Panda, are changing the marketplace. And what we've had to do was deal with that. And as you remember, or if you're not aware of it, we introduced our own delivery -- combined delivery service, (foreign language) Delivery back in February, where you can place an order on an app, you can have multiple brands delivered with one driver, which was quite unique at that point in time. We believe that focusing on delivery is a very integral part of the company's future. And that accessibility, as I mentioned before, it means that we'll be changing the areas where we were locating new units. Petrol stations, and as you can see there on the slide, with both Burger King and Pizza Company, Coffee Club in office buildings, convenience stores with Dairy Queen, shop-in-shop, I would recommend, if you haven't been to Paragon, and you've -- and you haven't made up to the fourth floor. Go and have a look at Coffee Club there, you'll see a very innovative and a very good experience as a Coffee Club brand.

Then, as I mentioned before, delivery is becoming part of everybody's lifestyle. I doubt if there's anybody in this room that doesn't use delivery services of some form or another. And we've had to adapt to that and adapt to it. Our call center is still a very strong tool to Minor food, in particularly, the Pizza Company. Our own apps, both through the Pizza Company, and as I mentioned before, 1112 delivery for combined orders, those 2 are still very strong. Then starting as of the 10th of August, we started to work with the third-party aggregators. This was bought along by the fact that we believe that, if you imagine that the marketplace being a shopping center. If you walk into a shopping center, and you don't have one of our brands, we don't get an opportunity. What we've done is we've worked with the third-party aggregators, placing our brands on their services, so that it gives the consumer accessibility to us. But again, we will make sure that we use the strength of our call center and of our own app to ensure that we still control ourselves.

Within Thailand, product innovation, very important. We continue to strive to make sure that we've got products that are applicable to the Thai consumer. If you haven't tried the cheesy shrimp pizza, I'd recommend that you do it. It is an excellent product, very uniquely for Thailand. Burger King has introduced chicken and rice dishes and pork with rice, again, unique to Thailand. As I mentioned before, the Coffee Club in Paragon in the Cloud, one of the most innovative things there is the -- if you want to say a burger, there is no meat. It is out of vegetable or a vegan product. And we were gradually moving that right through the system. And again, we're trying to stay ahead of what people want, in other words, well-being. In the case of the Pizza Company, if you had said, would we have breakfast in the Pizza Company a few years ago, the answer would have been no. But today, because of where we're building at the outlets, it's close to schools, it's close to where people are working, and we're finding there is demand for breakfast in Pizza Company. And then with Dairy Queen, it's working with branding partners like Line, then the Coffee Club, the introduction of [chok], which is put it plainly, I didn't think it work, but it's working very well within Coffee Club. So these are some examples of where innovation is a very critical part of going forward the marketplace in Thailand.

Now China Hub. China, we still believe it's going to be one of our key growth areas. This belief has been enforced by management and had to restructure the outlet portfolio by having to move or close some of the older, larger riverside units. For those of you who weren't aware, we had some legacy units that the leases run out or the landlords didn't want to renew for various reasons. And we had to do a shuffle around of our outlets. This caused some costs to happen. But by doing this, we have shown positive same-store sales growth in the second quarter, along with increased total system sales, 15.8%, and unit development of 14%. At the same time, they have increased further the business economics through their overhead restructuring and system upgrades. This is an ongoing process of the business in China as we scale up the Riverside brand into the key markets of Beijing and Shanghai areas. The key strategies for the rest of the year, as I've said, for China, is opening of units for Riverside. This, along with the efficient systems to cope with the growing business using the China ecosystems of digital connections to the consumers, and this is obviously to drive the top line and to increase the efficiencies of back-of-house. We want to continue to improve the customer experiences at all touch points of the brand. The Chinese consumers want to know where their food they are buying is being sourced. This will be Riverside's second major competitive advantage in the grilled fish segment.

I just mentioned Riverside has 2 competitive advantages: the first one is that all fish are delivered to the units live. Fresh fish is the strength of the brand. From the 1st of December, 100% of the fish supplied will be traceable from farm to chopsticks. The consumers have told us this is what they want. You may take that lightly, I know when it was first mentioned to me, I thought, you know, how can we have traceability on fish? But by working with one of the major suppliers of agro-food products in China, Bright Foods, we've been able to establish that. So that when a consumer wants to know where the food -- or should I say, where the fishes actually come from, we can trace it back to the pond and the batch of fish. This, we believe, from what the consumer is wanting, is something that will give us a big advantage in the grilled fish market in China. Combine that with the fresh fish and traceability, we see the growth of Riverside, being one of the dominant forces in Minor Food going forward.

Australia. The Australian Hub same-store sales declined by 2.3% in the second quarter as Australia continued to face economic slowdowns. There is various reasons that we can say that there's a slowdown in Australia, but Australia does get affected by China. And if China slows at all for mineral imports, it comes out in Australia. The total systems and sales improved [how it did]. We were still under pressure for growth. Management are working with franchisees to rationalize nonperforming units. The Australian marketplace, along with slowing economics is also seeing a shift on how people are shopping. It is no different than Thailand or the rest of Asia. People are changing their shopping habits. And this is affecting Coffee Club because pretty well 99% of our units are in shopping centers. How do we deal with this going forward? How do we offset the mall decline and the mall traffic? Obviously, it's the introduction of delivery, which is started in a small way, but showing very promising results by using Uber Eats and other delivery systems for their products. Introduction -- Coffee Club has been running a VIP program since the -- for about 12 years, and this is now being launched in a digital format, so there is both the paper format and the digital format, and that is due to gather more information on the consumers. The continued drive for international development of Coffee Club into the existing markets like Thailand and the Middle East will continue. We will expand our coffee roasting businesses through all channels, through Coffee Club and our white label opportunities for retail, and then through wholesale distribution of coffee through supermarkets like Aldi. We're one of the bigger coffee suppliers to Aldi in Australia.

And I mentioned before, through the expansion of Coffee Club overseas, as you can see there, there's some pictures of different areas where we've now opened: in Vietnam, Bali, the Seychelles, Maldives, Laos and the UAE, those 6 units are really icons for the brand. And what we're finding is that people are starting to understand what Coffee Club is and how to use it. So we see a lot of growth in a brand that is nearly 30 years old.

Just finishing up with what our key priorities are for the rest of the year. I won't go into a great lot of detail over this, but the 3 main areas are: driving same-store sales growth, in other words, comparable sales growth; diversified expansion; and focusing on our profitability. And under driving our same-store sales growth, I mentioned the focus on delivery. Today, you must be in the delivery, regardless of whether you're a dine-in restaurant or not. People expect to be able to order your products. That means that we have to adapt and adopt different ways of selling the products and adapt and adopt some of the different types of products that we're selling, but we must be in delivery. I mentioned earlier about the fact that in pretty well all the markets, whether it be in Thailand or in the Middle East, we have to make sure that we've got local flavored products on the menus. Increase our different dayparts. If we look at our assets, we have a lot of them that could operate 24 hours. We are taking a leaf out of Burger King's book and starting to open Coffee Club 24 hours a day. There are also opportunities to open several Pizza Companies in Thailand 24 hours, and again, growing the locations. Diversified expansion, as I mentioned before, our physical stores, selective expansion through new channels. Expect to see Dairy Queen on the BTS stations. Expect to see Pizza Company in smaller units, as I said, in close to where people live. And the complete diversification of physical stores will continue to happen in all of our markets.

Digital. This is a big focus for the group, not only for this year, but continuing forward, through our own apps to drive top line and the communication and connection with the consumer, but through loyalty programs and then being able to work with other people in the ecosystems of digital. Focusing on profitability. Consumers expect to go to restaurants, regardless of whether the economy is good or bad, they expect the restaurants to look good and feel good when they go in there. So we will continue to spend on upgrades. We will also look at relocation. As I mentioned before, the demographics doesn't stay still. We have to shift with that. So the development and opening of units is a continuous process. But when the economy is slow, one of the beauties of our business, we can pull back the development schedules. We don't have to plan 2 years in advance. The average unit takes 3 months from the time we find a location to the time we open it. So the lead time is short, and then we can turn that on and off at will towards the marketplace. And then as I mentioned earlier, driving digital is not just to connect with the consumer, but how do we make sure that the back-of-house of our business actually takes advantage of digital processing. For example, if we sell a Dairy Queen cone for THB 9 and a steak in Sizzler for THB 600, the processing cost for those 2 is exactly the same. It doesn't make sense to me. This is where AI and the future of digital will come in and make sure that our productivity for back-of-house is increased. We are a high-volume, low-margin business, so we have to make sure that we cover this off by the use of digital.

That's it for me. Thank you.

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [4]

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Thank you, Paul. Just to run past, the next one is Minor Lifestyle. So here, as I said to you before at the start, Minor Lifestyle, the revenue is up by 11% for the first half of the year, mainly driven by the retail and the contracting manufacturing business. But as you can see, EBITDA and net profit down by 39%, coming from a very low, low base, and EBITDA is down by negative 6%, mainly driven by discounting on the retail side. So -- and also Thailand, as I said before, has been quite soft. Again, 79% of our trading of Minor Retail comes from retail, and 21% comes from manufacturing or contract manufacturing. On the contract manufacturing, we managed to get some new customers or new contracts in the first half of this year. So that will start to show small growth over the next few months or the next quarters as well. But as I said, retail is a little bit soft, and it's been challenging. The brands have performed well from a sales perspective, but it's mainly through discounts and promotions. So that's the -- for Minor Retail and same-store system growth and total system sales. So as you can see, it's trailing up. Q2 was slightly up compared to Q1 and compared to last year as well. But this will -- this trend will continue to be almost flat. Okay?

So then we move to corporate information, or the 5-year plan. On the 5-year plan, as I captured before, if you look at our CapEx plan for Hotels, Food and Lifestyle. So this is what we have today. This doesn't reflect any of the new projects, which have not been disclosed here. So this is what we have today. So of course, the Hotels, 2018, you see a huge jump. And that was also mainly because of the NH acquisition, which we did. The next few years is starting to trend down or follow the usual CapEx procedures. But I think what's more important is the DE, our debt-to-equity ratio. As you can see, in Q4 2018, it was up. Q2 2019, we managed to bring it down to 1.55x, and as I said before, our target by end of this year is to take that down to one 1.3x, which is internal DE, what we target for, even though our external coverage is 1.7x. On the backup on the financing side, as you can see, our debt is about THB 124 billion, shareholders' equity is about THB 80 billion. And when you look at debt, actually what sits today at NH, it's almost less than 1x EBITDA. Our debt -- our net debt in NH Hotels is less than 1x -- less than 1x EBITDA. So which means it's almost debt free. And the thing is that NH also has some more plans in Q3 and Q4 to do some asset recycling, which will also increase their cash reserves there as well, which will help us also as we consolidate the numbers. And also Minor Hotels has also got plans in terms of recycling, which we should be able to announce in Q3 and Q4. So that's where we are, okay?

On the refinancing, refinance and the balance sheet and also the pipeline. As you can see, the balance sheet management 2019 performance, it has -- the profits has contributed to the equity base. Our 5-year syndicated loans have been drawn down to also repay the bridge. The repayment proceeds from NH rotation and the dividends of EUR 314 million will be also used to repay our debt. So moving forward, our interest costs will also come down with the repayment of these loans. And as we do a few more other asset recycling, our interest costs will further come down by next year as well.

On the 2019 performance for the second quarter, as I said, our profit will fall back to the equity base. Asset rotation, as I said, Tivoli was completed. The settlement was done or was received in July. So we've got a net cash of EUR 313 million, and that will be used to repay our bridge loan. The gain on the sale of these 3 assets is EUR 62 million, again, which will be reflected in the third quarter, which is about close to THB 2.1 billion, and that's excluding a 9% devaluation of the currency from euros to Thai baht.

Refinancing plans after the repayment of the bridge loan with the proceeds from the asset rotation. The remaining loan will be turned out into the long-term loan within Q3 '19. So that's our next action plan in terms of taking some of the remaining loans and also converting that into a long-term loan. So that will even out any of the cash or loan repayments in the coming years.

Right. This is our 5-year -- as I said before, our 5-year strategy. We've always said our revenue growth is 10%, net profit growth is 15% to 20%. This is our target. But of course, last year, as we did NH, that gave us a huge kicker to the earnings. So this year, our earnings for the Hotel group will be almost twice as last year because of NH Hotels coming in. And then we want to become the employer of choice, sustainable business, and also from a CSR perspective, we've been very active, very strong in some of our CSR projects by country, by region in terms of what we have done. I'm also proud to announce that we've also selected as the -- in the large-cap company as the Best Board of the Year, the award which we received this year from IOD last month. So it's a nice accolade have in terms of recognition of our Board and how they perform as well. And here, if you look at some of our growth pillars, we are -- we've got a strong brand portfolio. We've now got more than just under 45 brands across hotels, food and also retail. The value capture and productivity is also like -- we continue to increase our productivity, ways to increase our margins, whether through technology or more -- being more efficient and trying to rescale some of our operations, which is a continuous process. And then on the investments and partnership acquisitions, we, again, continue to look in terms of like -- something like an NH deal, which has been highly accretive to our shareholders, and also the value proposition is yet to be -- like, I think, we find the value proposition is very, very strong. It puts us in a totally different scale as a global company today by this acquisition.

Innovation and digital, as I said, and I think Paul mentioned a few of the innovative strategies which we're doing, both on the Hotel, Food and the Minor Retail side as well. Minor Foods brought in a Chief Digital Officer. Minor Hotels is working very strongly on the digital side with NH to create a platform, both on the innovations side. Today, you can actually book an NH Hotel through brand, but not just book the hotel, but you can also book your room. So you can also choose the room you want within the NH Hotels. And you can check-in online, which is an added value proposition, which we will hope to convert some of the OTA business into NH as well. And then by doing the technology in terms of creating one brand loyalty program that will also give us another kicker in terms of acquiring more customers because I think the name of the game is to -- is data, and how we use our data as well. So that's going to put us in a totally different wavelength. On the food group side, they've managed to create one data lake, so we managed to bring in all our customers from all the different brands into one data lake, where we can now start to target and market as well. And also by creating the 1112 one platform, where you can now order pizzas, burgers, Coffee Club, everything through just one click and one payment and one delivery as well. So that will then enable us to compete with some of the food aggregators. It gives us another step up. So we continue to improve our systems, continue to improve our digital technology, and also the e-commerce platform as well on that side. So there's a lot happening on that.

And then on the people side, as I said, I think today, we're not a Thai company. We are set to be a global company, and sort of we have been able to attract talent from all over the world, which has also put us in a very strong position. The other thing also which I would like to mention, when we come to this is, we've recognized the fact in Thailand, or in Asia, there was a huge gap or niche market for a hotel school. A hotel school, which can actually take you and offer you a degree as well. So in that, in the last 2 years, we've been very closely working with the government, and we were very successful to get an approval, which where we got approved to launch a hotel school in Thailand for the first time. And this is with Les Roches together with Les Roches as a JV. And our first batch of students will start next year in September. We've already recruited a CEO -- sorry, the COO for the hotel school. He was ex-[Laureate] and Stanford, who was the CEO from there, so he just started with us last week, and we're starting to set up the team and the people. The first launch will be at Anantara Riverside, where we will use our facilities there to launch the hotel school, and also in Pattaya at the AVANI in Pattaya, which we are going to create a hotel school.

As part of the EEC Belt, for which we get some good tax concessions as well. But I think the main driver is that this will actually increase our talent pool. And also we are able to offer a same degree as what Les Roches, what you can earn at Les Roches in Switzerland for almost 1/3 of the price. And also to be able to work in live hotels, because we have our hotels today, which will be a feeder into, not only our hotels, but also into other hotels as well. So we hope to attract students from all over Asia and even up to Australia as well. So I think this is another step up which we have launched under the People umbrella, where we've seen a gap, we see a need, and we also see a gap in the marketplace for Thailand as well, which will also help us to increase our talent pool and also the Thais to be able to get a degree actually here in Thailand with Les Roches together with us as a company. And the last one, as I said, is on the sustainable side. We work with -- we call it the main pillars: our people, our customers, our partners, and also the environment as well. There are many projects like you can see, I'm sure if you read a report on CSR, which we publish separate, you will see all the other projects which we are doing. And also the DJSI accreditation and also the FTSE4Good as well. So those are some of the growth pillars we have, which underlies the growth aspirations.

And here, this has been our roadmap. So roadmap has been -- it's been quite a rollercoaster drive for the last -- since 2009. So we started with 30 hotels in 2009, we got to 520 hotels in 2019. So in 10 years, we managed to increase our portfolio by almost 500 hotels in 10 years. So -- and our aspiration, as you can see, by 2023 is to get to 630 hotels in the next -- our journey for the next 5 years. You've seen our pipeline, 24 contracts coming from investments, about 65 coming from management contracts. So that's close to about 100, and that will be 520 plus 100 will be 620. So it doesn't include -- so our aspiration here, 630 hotels, doesn't include any new potential, so any new management contracts, which we haven't factored into this. So this is very realistic. On the food side, from 1112 which is how you order a pizza, which is in 2019, and that's the number of stores, actually we had. Today, we are at 2,268 restaurants, again, the growth is almost double. And also the aspiration is to get to about 4,400 in the next 5 years. Real estate -- sorry, under lifestyle and fashion, we had 292 retail shops with about 14,000 square meters of space. Today, we've got 496 or shy of 500 with about 32,000 square meters of space. Again, double, and then we hope to get to about 600 retail shops with about 46,000.

So that's pretty much where we are. And our aspirations. So based on that, I'd like to thank you, everyone, for your support and for continuing to believe in Minor International as well as a company. I think our journey in the last 10 years has been staggering. Our journey in the last 5 years has been in a much more steeper curve in terms of growth. And also not just growing, but also our ability to deliver earnings at 10% to 15% every year has also been quite -- it's been quite remarkable. And I think it's all down to our great management team, which we have, and the people. And today, we've got close to 65,000 people within our group. And I would put it to each and every one of them to their contribution and what they have done to get us to where we are today.

So I'd like to open up the stage for any Q&As. Paul and I are happy to take the Q&As, because you see us once a year, we are put on the stage to do a show for you and to tell you all the exciting things, which we have in terms of growth, in terms of the businesses we run. And also happy to take any questions. So thank you very much.

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Questions and Answers

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Operator [1]

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And then now the floor is open for any Q&A. (Operator Instructions)

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Paul Charles Kenny, Minor International Public Company Limited - Director [2]

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If nobody asks a question, I'll ask one.

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Thaniya Kevalee, Crédit Suisse AG, Research Division - Research Analyst [3]

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My name is Thaniya from Crédit Suisse. I have a few questions. First, regarding the residential sale that you have mentioned, has moved from second quarter to third or fourth quarter. So how confident are you that you can book some revenue from this residential sale in the next 2 quarters?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [4]

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Okay. Maybe I can take that. I think our goal is to make sure on the residential side, because it's an asset once it's sold, it's gone. To get -- to try to yield the best price. So we're trying not to discount, and that's the reason like in Q1, Q2, if you want to show some sales, we could have done it, but we've hold on to that, and we want to make sure we get the right price. I feel that, I'm sure, in Q4, we should be able to get some sales done. But I think our main driver is to make sure that we, as you see, our pipeline is fairly limited and more coming in as well to make sure we maximize on the price.

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Thaniya Kevalee, Crédit Suisse AG, Research Division - Research Analyst [5]

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Right. Right. So -- but are you at the point where you probably need to consider giving some discount now?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [6]

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No. We will not discount. That's what I said. I think if we want to discount, we could have had some sales in Q1, Q2. So we're holding on. So we will not discount. So I think -- but Q3 -- I think Q4, we have some leads, which we are hoping to convert.

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Thaniya Kevalee, Crédit Suisse AG, Research Division - Research Analyst [7]

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Okay. And I noticed that for the equity income, right? There is a reflection of the loss of this residential sale from your new project, the joint venture project also right? Is this because you have expense but you don't have any revenue?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [8]

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That's right. That's right. At the moment, there are some expenses, which we cannot capitalize. So there are the usual running expenses, which actually gets into the P&L.

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Thaniya Kevalee, Crédit Suisse AG, Research Division - Research Analyst [9]

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Okay. All right. And then on Anantara Vacation Club, you said, the first half was actually quite soft, both in terms of top line and profitability. Can you tell us some guidance whether it's negative growth year-on-year, both at revenue and profitability and bottom line profit? And the prospect for the second half, you already mentioned that July has already beat the target and increased year-on-year also. So we want to compare first half versus second half because I know that this is one of the source that directed earning in the first half of this year?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [10]

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Yes. So Q1, Q2 has been soft. But I think we see the turnaround in Q3 and Q4, which will be much stronger than Q1 and Q2. And the full year, we should be able to show growth based on that.

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Thaniya Kevalee, Crédit Suisse AG, Research Division - Research Analyst [11]

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Okay. Both top line and bottom line profit?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [12]

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Yes. Correct.

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Unidentified Analyst, [13]

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(foreign language) May I ask one question? Are you considering new acquisition emerging after you lower debt gearing ratio at the end of this year? Are you considering a new acquisition further next year? Or just the...

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [14]

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We don't want to make the same mistake as some of the other companies who just keep acquiring and not able to digest and deliver the earnings. So our main focus is to make sure we rationalize our portfolio to deliver the numbers because our focus is to drive earnings now. And also the other key focus, even though our debt-to-equity will come down to 1.3x, our other focus is to make sure our debt-to-EBITDA also starts to go down as well. So that's our 2 key focuses this year. As you can see, like we haven't gone in and done any other deals. So we're just in the process of making sure that the deals we have done are actually paying back and also trying to leverage that. So that's where we are.

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Unidentified Analyst, [15]

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Can you share with us what's the criteria for you to choose which asset for the location program? And what's the timing that you choose. So this is something quite new for us here. So we just would like to learn more about the economic and the rationale. And this can be a good funding vehicle for you in the future, so just would like to know whether you will do it again in the near future?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [16]

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Right. It's a good segue for growth, what we see, but we have to do it carefully. Because our main key focus is, on the mature assets, the assets which are mature and where we can get a higher multiple in terms of return, we will look at them to do a sale and leaseback. Let's say, for example, like the Barbizon in Amsterdam, we got almost 20x EBITDA multiple, and we managed to keep the asset as a lease. On the Tivoli in Portugal, the 3 hotels, we managed to get 20x EBITDA multiple, and we've kept the asset and we keep 75% off the EBITDA as well because we make sure that any lease we do, our lease coverage -- are leased to -- debt to leases about 1.5x, just to make sure we're fully covered so that in a downturn, we're not exposed, and we want to be careful to mitigate that risk as well. So we're quite careful. So I think in that process, we're going to hand pick some of the assets. We're not -- we don't want to rush into the market and start to sell because then it sends the wrong message and people will ask for a discount. And it's all about leveraging the price. And also making sure that we keep these assets on a sale and leaseback because what we don't want to do is to just sell and lose the asset. We want to sell and retain the asset and retain the EBITDA. So we want to have the cake and also eat the cake as well. So -- and that's our key strategy to make sure that we don't lose any of the earning potential. So that because we talk about sustainable earnings, and our sustainable earnings is to make sure that we keep increasing our net profits every year, not by just selling assets. We want to increase our net profits through the underlying business, so that is our key strategy.

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Unidentified Analyst, [17]

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Now it seems like the market is only in for your European assets, right? So for Asian market, is this applicable as well? For the sales and leaseback model?

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Emmanuel Jude Dillipraj Rajakarier, Minor Hotel Group Limited - CEO and Member of The Board of Directors [18]

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Asian market, like, as you know, most owners here in Thailand. They will not sell their assets. Because in Thailand, the culture is to keep -- to own the assets, right? So the sales -- that's why when you look at the sales, it's quite low, the sale transactions in Thailand compared to -- in Asia, sorry, compared to Europe. So Europe is much more mature. And of course because some of the funds want to crystalize, so they will, of course, when it comes to the end of the fund cycle, they will sell. Whereas in Asia, the assets are not owned by the funds. It's owned by individual investors, and they don't need to sell. The problem we will have in Thailand, is that if we do decide to sell, we will also crystallize the big capital gains tax. So which will be a leakage as well. So -- and in Thailand, we continue to earn 7%, 8% return on our assets, which is quite strong. So we don't want to sell and lease it back and give that upside to someone else. So we would rather keep it for our shareholders.

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Operator [19]

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There are no any questions. This concludes our presentation. If there are more follow-up questions, our team are more than happy to have them any time after. Thank you very much, and have a good day.