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Edited Transcript of MINT.BK earnings conference call or presentation 19-Aug-20 10:59am GMT

Q2 2020 Minor International PCL Earnings Call

Bangkok Aug 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Minor International PCL earnings conference call or presentation Wednesday, August 19, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Brian James Delaney

Minor International Public Company Limited - CFO

* Emmanuel Jude Dillipraj Rajakarier

Minor International Public Company Limited - Group CEO, COO & Director

* Jutatip Adulbhan

Minor International Public Company Limited - VP of IR

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Presentation

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [1]

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Good morning, everyone. Thank you for attending analyst presentation today. Today, the agenda is to recap our second quarter results we're going to go into detail by business units as well, Minor Hotels, Minor Food, Minor Lifestyle as well as corporate information. And at the very end, we will tell you about our response strategies to deal with the pandemic situation, both immediate and long-term plans.

Let's start with the quarter results review. Before we go into that, I just want to reiterate our opening plan and the recap of the impact of the COVID situation. We start to feel the impact of the COVID at the very beginning of the year. As you're well aware, we report losses in the first quarter. The lockdown started in March. We started to close some of our hotels, some of our restaurants and some of our Lifestyle outlets in March, but the full lockdown took place in April and May. The worst month for us in terms of the closure of our Hotels and Food and Lifestyle outlets happened in April.

We closed as many as 80% to 90% of our hotels portfolio in April, and we closed about 34% to about 40% of our food outlets in April with the remainder, 60-something percent open just for takeaway, take delivery.

For Minor Lifestyle, more than 90% are closed in April as well. But at the tail end of May, we start to seize the loosening of the lockdown across the globe. So we start to reopen our businesses with our hotel gradually open as well as our food outlets gradually open on the back of our consideration, whether the opening will give us cash positive or reduce losses that we're going to make or not. Up until today, June and July, we see improvement in business resumption and recovery. At this point, in the mid of August, more than 76% of our hotel portfolio are already open and operational. For our food, out of 2,000-ish outlets that we have, 95% of that already opened and operational in August.

For Lifestyle, almost all of our outlets are already open at this point. So that's just to recap the impact of COVID on the closure and the opening of our outlets. We just want to recap their second quarter results. If you looked at our core revenue, on a pre-TFRS 16 basis, our core revenue fell by about 79% year-on-year on the back of the temporarily closure of our hotels and outlets due to the lockdown. But if you look at our profit, a bottom line plunge from core profit of THB 2.1 billion in the second quarter of 2019 to net losses of THB 6.9 billion on a pre-TFRS 16 basis in the second quarter. And this is such a large losses, it was really on the back of the full lockdown that happened in April and May. And we have to say that on a monthly -- on a month-on-month trend, we see the negativity or losses has narrow over time throughout the second quarter, April, May, June to see the improvement in the bottom line performance.

In terms of international presence, we still have operated in 63 countries in the first half of this year, contribution from the national market account was 62% (inaudible) coming from Thailand. So from here, we're going to each business unit's performance, starting off with Minor Hotels.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [2]

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Okay. Starting off with Minor Hotel. Financial highlights for the performance of each business unit, let's start off with Minor Hotels. For Minor Hotels, we actually saw a revenue decline of about 91%. And that's, of course, primarily because of the temporary closure of the hotels pretty much across the geographies, especially in April and May of 2020.

So if you look at by business units, whether it's our own and leased management letting rights, management managed hotels or mixed-use businesses, all the businesses have actually seen revenue decline in the second quarter of this year. Again, also by geography, whether it's Thailand, Europe, Australia, New Zealand, Maldives, in the Middle East or the Americas, we've actually seen revenue decline pretty much across all the geographies as well. One thing to note is that in Australia and New Zealand, the decline is at a lower rate than other geographies. And that's because hotels in Australia have been -- have remained operational throughout the April and May COVID-19 pandemic as well.

So with such a decline in revenue, we've actually implemented a lot of cost reduction initiatives, which, by the -- in the second quarter of the year, we've been able to save by almost 60% of the cost during the quarter. So with -- but with the revenue shortfall, that means our EBITDA turned to negative of about THB 5 billion and net profits down by about THB 6 billion as well.

In terms of contribution, Thailand contributes 13% of revenue in the first half of this year, which is pretty much consistent with 2019, and that's primarily because pretty much across the geographies -- we've seen temporary close down of hotels across the geography. So in terms of proportion, it's still quite consistent, which should be the biggest part of the business. So still about over 50% is in terms of number of (inaudible) for all the entire portfolio, so including hotels that are temporarily closed as well.

And in terms of revenue contribution, it's still over 50% from leased business model and in -- owned and leased, sorry. And in terms of revenue contribution, again, over 50% is from Europe, even though the majority of the hotels have been closed as well.

Going into a little bit more on the statistics, in terms of number of rooms, we've actually increased number of rooms by about 2% year-on-year, but again, this is the entire portfolio. So it also includes the hotels that have been temporarily closed as well.

In terms of RevPAR for the second quarter, system-wide RevPAR has been down by 95%. Again, that's primarily from the occupancy that we only had about 6% occupancy in the second quarter of the year. If you look at the monthly trend, you can see that for the entire portfolio, we started to see improvement since June. From RevPAR down by about 98% to about -- down by about 89%. And going to July, it's improved even further to about -- down by about 72%. So that's primarily as the hotels started to reopen since end of May gradually.

For opened hotels, in terms of statistics, a little bit -- you see a little bit better. In terms of RevPAR, the magnitude of the RevPAR that's down, it's about 65% in July. And with that, in terms of occupancy, we've got about 34% occupancy in July for the opened hotels only across the portfolio.

So the trend is getting better, is improving.

Again, I think across the portfolio, the trend will be pretty much the same, similar. So in Thailand, we're seeing RevPAR decline by almost 100% in the second quarter as the hotels are pretty much closed. We started to reopen the hotels selectively in July. So that's when we started to see the trend going back up. And primarily in Thailand, once the hotels are -- opens, it's catered primarily to domestic tourists. And we're seeing good traction in destinations like Hua Hin and Pattaya and also in Phuket as well, as we serve more and more domestic travelers.

For Maldives, the hotels continue to be closed. So we've closed the hotel since about April of this year, and it will remain closed throughout the third quarter as well. That's the plan for now, and we reopen in the fourth quarter in time for the high season.

For hotels in Europe and the Americas, again, same -- pretty much the same story. So RevPAR is down by about 95%. Pretty much all the hotels have been temporarily closed down in April and May. We started to reopen. And now as of today, about -- over 70% of the hotels are already opened. And in terms of RevPAR trend, we're seeing better traction going into June and July as well.

Asset-light, again, pretty much the same management letting rights. As I mentioned earlier, in Australia, the hotels have remained open throughout the pandemic time. So we're seeing less magnitude in terms of negative RevPAR. So RevPAR in Aussie dollar term is down by about 65%, 66%. And the trend is getting better and better each month as you see that by July, RevPAR is already down -- is only down by about 35%. Management hotels, again, pretty much the same trend. Worst month in April, and seeing improvement going into June and July.

This is the hotel expansion pipeline. I think it's not much different from what we've shown earlier. So pretty much, we still have 23 hotels for the owned and leased portfolio to be opened over the next 2 or 3 years. For management contracts, we have 50 hotels over the next 3 to 4 years to be opened as well.

For the mixed-use business, if you look at revenue, it's declined by about 79% in the second quarter of this year compared to last year. So that's primarily because we didn't have any residential sales and we also saw declining sales activities of Anantara Vacation Club as well because of the outbreak. So that means with the outbreak, there's no marketing towards -- there's no conversion of the sales. So we've seen a decline in the Anantara Vacation Club sales in the second quarter as well.

Going into -- a little bit into the food. Food is a little bit better because even in the -- during April and May, even though we had the lockdown in many of the countries, but at least the delivery business continues to be operational. We only had to close down the dining business during April and May. So if you look at in terms of same-store sales, we've actually seen gradual improvement. April was the hardest month, of course, that's because of the lockdown in the majority of the countries that we operate, including Thailand and Australia. But going into May, June and July, as country started to reopen, we started to see a better performing trend.

In terms of revenue, we saw revenue down by about 32%. Again, that's primarily because of the decline -- the shutdown of the dine-in business. All the delivery business helped with the sales, but it wasn't enough to cover all the losses from that -- the sales shortfall from the dine-in business.

We also had some cost reductions on the food side as well. So because of that, in terms of EBITDA, we still continue to report profitable -- positive EBITDA in the second quarter even pre-TFRS 16. But of course, with the depreciation and interest, net profit was on a loss.

In terms of contribution, Thailand contributed 74% in the first half. That's primarily because China and Australia were a bit harder hit during the first and second quarter. So Thailand was the one that -- the food business that's been quite resilient over the past 6 months.

Going into Minor Food portfolio, 50% of the business is owned, about 50% is franchised. But in terms of revenue contribution, 95% owned and 5% is franchised.

In terms of geography, Thailand continues to be the biggest contributor for the Minor Food business in the first half of the year. This is the operational stats by hub. So as you can see, for Thailand, we started to see better trend in terms of total system sales since like around June and July, once we started to reopen the operation since about end of May.

In terms of same-store sales, April was actually a very special month for us because that was when we ran the buy one, get one free campaign over into April as well. Usually, this is March for a pizza company. So because of the -- that campaign, we actually saw positive same-store sales growth. That was what drove the positive same-store sales during April.

For China, since the close down in February, we continued to see -- continue improvement, except for the month of June, when they had the second wave of the COVID in Beijing and the government has been precautioned in closing down the cities. But after that, going into July, we started to see the -- both the same-store and total system sales going back up. And with that, we're actually expecting it to go back to kind of at a normal level, pre-COVID level by August.

And in Australia, again, same thing, April was when they closed down. May was -- towards the end of May was when they started to reopen. So we're starting to see good traction going into June and July as well for Australia.

Very quickly for Minor Lifestyle. Again, same trend in terms of total system sales and same-store sales, April was the worst month and then gradual improvement going into June and July.

For Minor Lifestyle, what we're trying to do is focusing a little bit more on the online business. So that's what we're doing on the retail trading side. On the contract manufacturing side, because we've been selling -- producing and selling sanitizers and cleaning products, and the demand has been quite strong over the past 6 months. We're seeing good sales momentum from that.

In terms of financial performance, again, revenue is down 49%. We made some losses, both in terms of EBITDA and at net profit level as well. Corporate information. I think this slide is pretty much the same as what we've presented earlier. So we have delayed and suspended some of the CapEx, probably about THB 5 billion to THB 7 billion going into the -- over the next 2 years. So that's to preserve our cash flow as well as our liquidity.

In terms of leverage ratio, we're at about 1.6x in the second quarter. So we have the perpetual bonds coming in as part of the equity to help offset the net loss coming in the first half of the year. So that's helped maintain our DE level. But keep in mind that we've already got approval from our creditors to waive the testing of the covenant up until the end of this year. So that gives us another level of cushion for that. And also going to third quarter, we also have the right offering, which will be coming in the third quarter. So that will also strengthen our equity base further in going to the third quarter as well. And we've already issued the warrant, which we will get the capital of about THB 5 billion coming in over the next 3 years.

So I hand it back to Khun Big for -- on the response to COVID-19.

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Brian James Delaney, Minor International Public Company Limited - CFO [3]

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Yes. As we have all along updated you on our strategy and our plan to deal with this COVID pandemic impact, our strategic road map remain unchanged. We have the Phase 1, which deal with immediate priorities when the lockdown happened, and Phase 2, the attempt to cease demand recovery, which we're doing at the moment. And Phase 3 business beyond COVID, spotting consumer trend or behavior that can change after COVID and then how we're going to re-strategize or change our business model.

At this point, we're in the middle of Phase 2, and the efforts remain unchanged that I already explained to you during our road show earlier.

Our efforts continue to be recovering revenue, also review our operations. We think our organization, and we continue to adopt digital solutions to connect more with consumers and bring more revenue in the long term.

Just to give you some recap on the reopening progress, like I mentioned to you at the very beginning. Hotels now more than 75% of our portfolio are open at the moment. As for our NH portfolio, more than 75% of their hotels are already open as well.

For Minor Food, more than 90% of our outlets are open. Those that remain close are all concentrated in the tourist destination. So we just have to wait until the border opening take place so we can reconsider the opening of the remainder -- the remaining of our food outlet that has -- that are closed, that 5% that are closed. For Lifestyle, almost all of our Lifestyle outlets already open.

Right now, we have to pretty much focus on domestic tourism for hotels, since the border is still close. We're still trying to push and drive the travel bubble program in dialogue with the government to see if that can happen soon within this third quarter, in the fourth quarter of this year. That will bring in not only the domestic tourism, but some of the selective regional tourism to our part of the -- this part of the world, especially for Thailand and other Asian countries that we have in our portfolio.

For Europe NH portfolio, pretty much they have a lot of domestic demands. NH can take advantage on the -- its strong positioning and good and strong location in each of the European countries for the stabilization and recovery phase that will come initially from domestic customers.

In Germany, 70% of the business comes from domestic demand, 60% in Spain, 50% in Benelux, and Italy and also the B2C segment, representing 60% of NH revenues, we recover faster than the B2B business. So that -- we still try to continue to monitor the situation. We still remain fluid. And we would hope that this demand is sufficient to uplift our performance in the remainder of the year. However, we will continue to protect our profitability by way of reducing costs and minimize our cash outflow with limited revenue recovery at this point while we wait until the lockdown of border controls are opening up.

We continue to come up with cost-cutting initiatives, something that we've done before, we streamlined our manpower. We reduced our payroll costs by way of -- manage our part-time, full-time customers in a more effective manner as well as doing some temporary redundancy or even permanent redundancy. And also, we still continue to negotiate with our landlord to reduce our rent expenses as well as our suppliers to get the better terms of payment and discounts. And we cut down all of our unnecessary expenses as much as possible. So the cost saving for the whole year, we expect it to be -- to come down by 25% to 30% of last year or almost 30% of the budget that we originally planned for this year.

And also, the CapEx, we have cut down CapEx significantly this year by almost half. CapEx cancellation this year hover around THB 7 billion to THB 10 billion and as well as dividend cancellation that we already explained to you earlier in our previous presentation.

For our cost saving to be -- to give you a little bit more detail. Payroll has come down by 25% to 30% as well as suppliers costs, other costs and rental costs also come down by more than 20% to 25%. That's also bode well in the second quarter of this year. If you look at our second quarter results, our cost reduction is as much as 50% year-on-year in the second quarter of 2020.

With regards to cash burn, like I told you earlier in previous meeting that we have the definition of cash burn quite vary from 1 to another.

So we just want to make it clear. We use free cash flow, which comprise operating cash flow, net CapEx and repayment of lease liabilities as our indicator of cash burn. If you look at our free cash flow in the first quarter of this year was negative THB 6.4 billion. In the second quarter of this year, it's ballooned to about THB 8.7 billion -- negative THB 8.7 billion with the bulk coming in for the month of April and May, when the lockdown happened. But in June, we start to see a free cash flow negativity narrowed to THB 2.1 billion. If you look at April, April was negative THB 3 billion, May was negative THB 3.6 billion and the negativity come down to THB 2.1 billion in June.

And if you look more closely to operating cash flow, operating cash flow was the worse in May, when the full lockdown happened. So we believe that the worst is behind us and it's over. That operating cash flow improved significantly in June. We only saw negative operating cash flow of THB 0.5 billion when combined with reduced CapEx and lease -- repayment of lease liabilities, altogether, free cash flow was negative THB 2.1 billion, which is better than April and May. And we hope to see a much better number in July onwards in the remainder of the year with the reopening activities start to gain more momentum going forward as well.

This slide is just to give you the breakeven points that we're trying to reduce to the level that we can see the breakeven sooner. It's our attempt to accelerate the breakeven time line for this year. So with drastic cost-cutting program that we implemented, which I told you earlier in the previous slide, on a firm-wide basis, we managed to reduce breakeven points for hotels. We use occupancy as a parameter to indicate the cash breakeven that we would like to see. Before COVID, the breakeven for hotel was hoving around 50% to 60%. We managed to reduce down to about 30% to 40%.

For Minor Food, we use the pre-COVID sales level as the parameter to measure breakeven. To -- before we do our cost-cutting initiatives, we have to achieve about 82% of pre-COVID sales figure to see our cash breakeven to -- or pre-TFRS EBITDA breakeven for food. But we have managed to cut costs, bring down this breakeven to about 69% of pre-COVID sales. So as soon as we get to 69% of our pre-COVID sales level, we will see our cash breakeven for Minor Food.

Just to give you some color on what happened this year so far. If you look at the -- like I said, the breakeven point for hotel, we managed to bring it down from 50%, 60% to about 30% to 40%. For the number of June and July, our breakeven (technical difficulty) occupancy for Minor Hotels in June was around 16%, 17%.

In the month of July, our occupancy hovering around early 30s. So we're not there yet to see breakeven point for Minor Hotels. But hopefully, in August or the remainder of third quarter, we hope to drive occupancy to get to the level that we -- that would touch the reduced breakeven point that we projected.

For Thailand, we -- in July, we have managed to reach or surpass our forecast. I have to explain to you that for Minor Hotel as a whole, in July, the gap between the actual occupancy and the breakeven occupancies pretty much come from NH or European and LatAm portfolio.

If you look at Europe and America's portfolio, in June, we expect -- we forecast occupancy of around 16%. We achieved about 14%, 15%, which is in line. But in July, we forecast about 40 -- a little bit more than 40%, but we achieved only early 30%. So the gap is right there, but we now hope to pick it up in the remainder of third quarter and also in the fourth quarter of this year. So let's just hope that we get there to see breakeven -- cash breakeven for Minor Hotels in the remainder of the year.

For Minor Food, it's -- the actual number tracking well or better than our expectation. If you look at the chart below in terms of total system sales, the dotted blue line is the breakeven level that we have reduced down. If we get -- achieve that breakeven of THB 2.6 billion sale -- monthly sales level, we'll get to our cash breakeven. And we have already achieved that in the month of June. We have already get to our breakeven level for Minor Food in the month of June, with the -- especially with the reopening that we opened more than 90% of our food outlets, the dine-in, come in stronger than we expected. Delivery still maintain a good momentum. That's why we already see the breakeven at the pre-TFRS EBITDA level for Minor Food already in the month of June. And in the month of July, it's even higher. And we're probably going to see some profit in the fourth quarter of the year.

For delivery, delivery has gained strong growth during the lockdown period because the dine-in has been closed down. We managed to see deliveries sales more than almost 200% increase in the month of April and in the month of May, more than 100% increase. In the month of June and July, we still see high double-digit growth figure for delivery, even though dine-in come in faster than we expected. So that's why you see the growth of delivery softened a little bit in June and July because dine-in came in stronger than we expected. But even so delivery growth in the month of June and July, like I said, in the month of June, it's over 80%, in the month of July is still over 50%. We continue to see -- we continue to drive both dine-in and delivery in the remainder of the year.

Next slide, just to recap on the liquidity and debt management, like Jutatip just mentioned earlier, we managed to get covenant waiver from our bondholders and from our creditors. So we don't have to test our debt covenant until the end of first quarter of next year. So that give us another layer of flexibility to manage our liquidity and our leverage ratio. And in terms of credit rating, we have -- our rating has been reaffirmed by TRIS at A-rating. So that's some good news that we had even though during -- in the mid of the COVID, we managed to get our rating at the same level, even though the outlook is negative, but that negative outlook is pretty much a sign on the back of the environment and COVID situation in general.

In terms of debt maturing, we managed to secure facilities from our creditors. So we have enough liquidity to fulfill our debt obligation and also to prepare for any uncertainty or evolution of the pandemic situation in the future.

Cash on hand at the moment sit at THB 36 billion, with working cap facility of another THB 26 billion. Altogether, that give us THB 60 billion to THB 70 billion liquidity, which we believe that enough to cushion any uncertainty that can happen in the future.

To recap on the capital raising exercise that we have done. We have already completed our comprehensive capital raising plan that we announced 2 months ago. We have successfully issued perpetual bonds, USD 300 million. We managed to complete our right offering offers. Both perpetual bonds and right offering have been overwhelmingly oversubscribed and successfully completed and the warrants that also waiting to be exercised in the next 3 years with the low exercise price of THB 21.6. We believe that we're definitely going to get another THB 5 billion in the next 3 years to strengthen our equity base. If you look at our pro forma debt-to-equity ratio with the right offering that we have, debt-to-equity will be -- will hover around 1.45. And with the warrant proceeds, our debt-to-equity pro forma basis will come down to about 1.37. We're still pretty close to our internal policy of 1.3 conservatively and well below and well within our financial covenant of 1.75.

So that's in terms of our capital raising exercise and also our liquidity position. Going forward, we will continue to look at how we're going to recover our revenue. We will try to stick to our safety and hygiene standards. For Minor Hotels, apart from the safety hygiene standards, we have to find a way to do some commercial engagement with consumers.

We launched -- we discover Anantara campaign, come back to AVANI campaign as well as the Peace of Mind, Feel Safe at NH to make sure that consumers and customers will feel more confident and comfortable staying with us.

So we -- not only that, we also spot -- change in consumer behavior trend, increased importance of cleanliness, securing certification like SHA certification from the Top Tourism Authority of Thailand. That also helped increased confidence of our consumers and the spotting trend of health consciousness of our consumers. So we can leverage on our wellness and medical spa that we have partnership with the specialists at the global level, like the Anantara and Verita that we will do this wellness at Anantara Siam and Anantara Riverside. And St Regis also partnered up with the la Prairie as well.

So that's something that we will do, and we'll keep doing for Minor Hotels. But more importantly, the strategic move that we're trying to come up with is the reliability of our brand. We have to make our brand on top to be -- to stay on top of mind of our consumers. Not only the commercial engagement through PR and marketing campaign, but like I said, the securing of certification, health certificates from international company that will help increase confidence that also increased brand reliability as well.

For Minor Food, we will continue to leverage on our own delivery platform. I think one of the main advantages that we have over other player in the market that we have our own delivery platform (technical difficulty) and drivers in our fleet. These driver has been trained, and they have quality of their service that can help bring in more consumers to use our delivery platform. So we will continue to leverage on that to increase delivery sales momentum. And as well as for Minor Food, we have done a lot of corporate organization transformation in terms of digital transformation as well as our supply chain, innovation, product innovation in terms of digital, not only delivery, but we also look at to see how we're going to strengthen our loyalty program that will also increase the revenue and profitability over the long-term as well.

For Minor Lifestyle, we will continue to focus on not only brick-and-mortar store, but also online channel. And we also want to leverage on the manufacturing of our hand sanitizers and other cleaning products, which are in high demand from the consumer at this point. And we can also reduce our cost. If we have to have a new protocol at our hotels or at our restaurant with the new -- with the sanitary protocol, we can leverage on Minor Lifestyle manufacturing of this cleaning product, our sanitizer to reduce our costs and protect our margin on that front.

So that's -- I guess that's the wrap for presentation during -- for the second quarter results and recent developments that we have during the quarter. So right now, we're going to open for Q&A. Please send us Q&A online or even speak up but one person at a time because of the -- because if -- if more than there will be an echo.

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Questions and Answers

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [1]

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[Operator Instruction]. So this is the first question. Would second wave in Europe affect European hotel occupancy rate? And any risk, of course, in down the hotels again?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [2]

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Well, it affect our occupancy a little bit. Like I said -- like I showed you earlier in the slide, when we forecast breakeven when we forecast occupancy to -- in the breakeven slide. We expect July occupancy at around 40%-ish, but we achieved early 30%. Part of it is because the second wave or the virus that happened here and there in Europe during the month of June and July. But we hope that this is still minimal and controllable. So in the remaining third quarter or fourth quarter, we will try to pick it up.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [3]

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We have a question from [Bipen]

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Unidentified Analyst, [4]

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So thank you very much for a very comprehensive presentation, especially on the response to COVID-19. I have a few questions. So the first one is on the like given occupancy rate, right? I believe that this is based on the assumption that average rate is about 10% to 15% lower than usual. May I check with you quickly what's the current rate that you can achieve now in July and August for Thailand and for NH Hotel in Europe?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [5]

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Yes. Well, this breakeven analysis, taking into account the 10% to 15% decline in ADR already. It's already baked in 10% to 15%. And the range of occupants -- breakeven occupancy, we bake in another plus or minus 10% of ADR as well. So altogether, it will be roughly about 20-ish percent decline in ADR bake in to our breakeven analysis. But actual ADR, let's say, in the month of July for total Minor Hotel portfolio, we saw ADR decline by about 21% to 22%. So I think it's still within our ADR assumption at this point. And for NH, in particular, in July, they saw the ADR decline by about 20% to 21% as well. So still pretty much within our assumption parameter. But we have to keep monitoring the situation still, the evolution situation is still ongoing. And then we will update you once we have the number in the rest of the third quarter.

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Unidentified Analyst, [6]

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I see. So I think it's still achievable that you can keep your hotel in operation throughout the remaining of this year, right, based on this occupancy forecast?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [7]

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Yes. We will continue to consider whether to open or not open based on cash, cash positive or whether it's enough to reduce loss. It's -- if we open hotel and help us minimize losses, we'll do so. So at this point, 75% of hotel already open. And for NH in particular, we would hope that we will get to about 80 to -- 85% to 90%, maybe by the end of third quarter.

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Unidentified Analyst, [8]

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And my second question, which may be a bit on a longer term horizon, right? Given that the hotel industry might suffer for a longer while from COVID-19, right? We don't expect the international travel to come back to pre-COVID-19 very soon. In the longer term, right, will you consider to be more aggressive on the food business to make up for the lost revenue from the hotel side?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [9]

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We will even -- even without COVID, we will probably going to be very active in terms of transform our Minor Food organization to get more revenue and profit and remain in the leading position in the market that we operate. If you remember before COVID, we have enterprise-wide transformation update that we updated to you and main focus of that transformation -- organization transformation for Minor International is primarily on Minor Food. We have done so in terms of product -- new product innovation, digital transformation, the way of work, management capability. So everything has been done even before COVID, but COVID came in as an accelerator and as a catalyst to speed up that transformation. So we would continue to do so for Minor Food in terms of drive, dine-in because -- and delivery, both at all channels, we're trying to become number one. Dine, we will try to become more relevant to a new generation of consumers.

We have done brand revitalization program for the key brands that we have over the past few months, and it works -- it worked well, showing -- the numbers showing improvement in sales as well as, as I said, delivery also maintained strong momentum with consumer behavior is changing during the lockdown, people are more familiar with how to use apps. So we would leverage on delivery platform or 1112Delivery that we have, bigger and stronger than anybody else in the market to capture that trend.

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Unidentified Analyst, [10]

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I see. So after you are done with your 5-year plan later this year, we might see more contribution from the food business over the next 5 years, right, comparing to the previous 5-year plan?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [11]

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Well, contribution from food like we have to -- the situation still evolve, still remain fluent. So we would see that at this point, with hotels, still see international border closing, food will probably going to be the one who alleviate that adverse impact. So diversification strategy is to work really well for us. But going forward, we have to wait and see whether -- how soon the hotels get back on track on the government direction and the border opening up and the vaccine and everything. So our 5-year plan still remain very -- we're still doing a very -- how can I say fluid 5-year plan, let's put this way.

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Unidentified Analyst, [12]

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Yes. And my last question -- yes, sorry. Yes. And for my last question, where if things remain quite bad, right, on the hotel side, especially, right? Is it possible to ask further debt covenant waiver for next year? I know that this will be in -- by the end of this year. Is it possible to extend this to the whole of 2021?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [13]

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No, this covenant waiver extend until -- we will get test again at the end of March next year. So we still have like almost 9 months to go without having to test. But again, we have done a comprehensive capital raising strategies, which give us a lot of liquidity and cash that we can still -- with endure even the second wave or third wave that can come in during this period. So -- but debt covenant waiver, if we're going to do it again next year, it depends on the situation. I can't answer this question right now. But I believe that the confidence that we have seen so far from investors, both fixed income equity investors that we've seen during the perpetual bond exercise and RO, right offering exercise, it's quite overwhelming, and we're thankful for that.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [14]

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Next question is about cash burn rate. Could you please share cash burn rate in July and the outlook in August?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [15]

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Well, up to this point, we're still waiting for the number. So we'll share with you as soon as we have finalizing the number. But preliminary, it should be better than the month of -- than second quarter and first quarter because the lockdown is over. So like I said, we should see a recovery in our cash flow or cash burn rate, but the final number hasn't been finalized.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [16]

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(inaudible) has raised hands in the chatbox.

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Unidentified Analyst, [17]

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Thanks for the detail presentation. Two questions on my end. When I see some alternative data, I see that Netherlands and in Spain kind of has kind of really picked up going into August. If you could kind of elaborate how we are seeing in different countries, difference in terms of how things are panning out from July to August? That's question one. On question 2 is your 2Q numbers below EBITDA has been kind of suffering due to excess liquidity you are holding. So you have high cash on hand, but you've broadly kind of drawn down a lot of more kind of debt as well. How should we think about interest costs going forward for the next year?

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [18]

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Okay. The question on the different parts of Europe. I would say, you're right. So in Spain, we're seeing occupancy going up to like in the high 40s up to 50s that's kind of like the latest trend that we've seen. So in Spain, we're actually doing quite well. Also in Benelux, again, we're also seeing occupancies going up to like in the 40s. That's like in the late July as well as in Central Europe. So I think for those countries that started to reopen a little bit earlier, they're starting to see traction going up quite soon. I think the only one that is kind of like maybe lagging a little bit in terms of occupancy is Italy. There -- in terms of occupancies is in like the 30s.

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [19]

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Well, for your second question, our priority or main priority is to keep liquidity in -- within the company. So that's why there's a debt drawdown. If you look at, especially during the month of lockdown, April and May, especially in May, when we have negative -- high negative operating cash flow, we want to make sure that we have enough and sufficient liquidity in hand. So in the course of next year, it still depends on the situation. If we see the improvement in our operation, which can bring in a positive operating cash flow, we would release some of the working cap or liquidity that we have and then interest can come down alongside the evolution of the situation. But as I said, the main priority is to keep liquidity as much as possible at this point.

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Unidentified Analyst, [20]

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And could you talk a bit on the room rates in NH for different countries?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [21]

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Okay. Well, just now, I told you about room rate in July, just to give you some color. For Minor Hotel in total, July ADR come down by 22%. For NH, it's come down by about 21%. Elsewhere...

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [22]

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Sorry, (inaudible), did you want the room rates for like the different countries in Europe?

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Unidentified Analyst, [23]

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Yes.

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [24]

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In Europe only or...

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Unidentified Analyst, [25]

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(inaudible) NH. Yes.

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [26]

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Okay.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [27]

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If you look at -- again, it also varies. In Spain, it's down like in the -- and -- well, let's just look at the trend, right? So I'm just going to kind of give you the trend in like July. Spain is definitely in terms of kind of like the reduction in room rate, it's actually been improving. So it's down in the high 20s in Spain. Italy is like in mid-20s. Benelux is just about 20%. And then Central Europe is less than 10% down.

Our next question is on NH, again. Does payroll subsidies from government in Europe already booked in the second quarter? And have you been able to cut your hotel lease liabilities in Europe?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [28]

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Yes, the payroll subsidy happened in second quarter and also in the third quarter. And also lease payment, we negotiate to reduce down our rental in Europe significantly as well. But going forward, we would try to do on a long-term basis, convert some of the fixed components to a more variable components as much as we can. So the cost reduction that happened on the back of negotiating with landlord will be pretty much more pronounced this year. But for next year, we have to see and further with our landlords too.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [29]

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So if you look at -- in terms of repayment of these liabilities on this slide, you can see that in the first quarter, we're actually -- we're paying about THB 3.3 billion. But in the second quarter, it's down to THB 1.8 million. So it's been reduced because of the lease negotiations.

Next is about NH as well. As NH Hotel focuses on corporate customers. And how could NH Hotel adjust its strategies to other group of customers?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [30]

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No, actually, if you look at the slides, NH has B2C customer as high as 60% to 70%. So that also helped. They're seeing faster recovery from B2C segment, which account for as high as 70% of their customer feeder portfolio.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [31]

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This is more on high level. As the situation prolongs, what are MINT's next strategy is to enhance the liquidity and the performance overall.

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [32]

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Right now, we have quite substantial liquidity. As I mentioned to you earlier, we have almost like a THB 60 billion liquidity with cash of THB 36 billion, with working credit facility of THB 26 billion. And with the successful perps right offering and warrants that are going to bring in another THB 5 billion, we still -- we're not so concerned about our liquidity at this point. Even though there are going to be a smaller second wave or third wave, we still believe that we will be able to withstand that impact with our liquidity that we have in hand right now. If not worst-case scenario going forward in the following year, like we have been telling investors in the past or what we have done in the past, like asset rotation strategy that we had, the selling of the Tivoli assets. Last year, the selling of Maldivian assets last year and we still have a quite significant good asset in our portfolio. In worst-case scenario, if we have to improve liquidity by way of capital or asset rotation, we have this option on the table still.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [33]

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Khun [Anusha] has raised his hands in the chatbox. (foreign language) Next on the cost saving. Is there any potential cost saving further on the recent line of 25% to 30% down?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [34]

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Well, we will continue to receive cost saving measures on an ongoing basis. But the -- I think the bulk of it, we have already seen and reported in the presentation. But we would try to gather more numbers and information during the third quarter, and we're probably going to update you at the end of the third quarter.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [35]

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The next question is on the industry. Could you please share the industry outlook after COVID? How much capacity is in Thailand and Europe in your view that will decrease after the COVID-19?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [36]

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Well, I have to put it this way. COVID situation has weeded out some of the smaller players, some of the players that don't have strong -- a strong platform and some of the players that don't have enough ability to raise liquidity or funding. So a lot of the smaller players have gone under. So we would hope to gain some of those market shares. As well as the -- some of the players that used to be popular in the past, basically, those sharing economy accommodation players. But with this COVID situation, people are more concerned on hygiene and safety standards. So they would prefer, like I said, any hotel chain that had strong brand reliability. So the shift to -- from those sharing economy accommodation player without proper safety and hygiene standards to a proper hotel chain with certification, with brand protocol like us, we would hope that we would probably gain more market share going forward on the back of this pandemic.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [37]

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Next question is on NH. Why did Europe underperform your expectation in July? And what's your expectations in the coming months?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [38]

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Well, like I said, there's some like some news flows or smaller, second wave, third wave that happened in Europe, here and there, for example, in Spain.

So that's probably part of the reason why we still see -- because when we forecast back then, we assume that there is no second wave or third wave that coming -- to come in under our base case scenario. But like I said, we would hope to pick up in the remainder of third quarter or in the fourth quarter, because it looks like the situation is still under control. So we hope to see a better number in the fourth quarter.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [39]

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Next question is on cash on hand. Could you please share cash on high level and expectations going forward?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [40]

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Well, cash on hand is THB 36 billion. And then separately, we have credit facilities of THB 26 billion. So I think like I reiterate it over and over, it's enough for us to go on throughout the remainder of the year and next year, even though there would be going to be another smaller wave of the virus. We still think this is sufficient after our comprehensive capital raising plan that we successfully completed.

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Jutatip Adulbhan, Minor International Public Company Limited - VP of IR [41]

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On the covenant waiver condition that we have to maintain total debt less than THB 150 billion. Is this THB 150 billion in only interest-bearing debt or all type of debt?

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Emmanuel Jude Dillipraj Rajakarier, Minor International Public Company Limited - Group CEO, COO & Director [42]

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Interest-bearing debt.

So is there any more questions? You can still send your question to our Investor Relations department later on and we will try to address every single question that you have after the call as well.

Okay. Well, if there's no more question, thank you for attending this analyst meeting online. And sorry for some technical problem that we had early on. We hope to improve this going forward. And also feel free to send your feedback, comments or questions you have, and we will address it as soon as we can. Thank you very much.