Minor International Public Company Limited (MINT) Earnings Call Transcript & Summary

[Audio Gap] growth, both year-on-year and Q-on-Q as well. The Minor Hotels performance weakened on a quarter-to-quarter basis, mainly because of our exposure in Europe, which was badly hit by the second wave where most of our hotels had to go into a lockdown or a closure as well. The other businesses within Minor Hotels actually showed a growth on a quarter -- on a Q-on-Q basis. Our business in Australia remained robust and was profitable at EBITDA level, and we see it growing as well. The mixed-use business also turned profitable at net PAT level for Minor Hotels also. What we are seeing now, based on post-COVID, what we're seeing is with the evolution of the different vaccines, which have come and also been approved by FDA in different countries, and more importantly, the vaccination has also helped most countries with some positive news coming out of the rollout of the vaccines. We see that more than 250 million shots have been given globally. The number of new COVID cases has been declining on the last 6 weeks. The number of new deaths also has been on the decline as well. And many countries are now starting to explore a vaccine passport or what we call a standardized vaccine passport to allow people to travel freely between the countries as well. Now this is quite promising, and it's quite positive for the hospitality industry in general. We -- the next pillar I would like to touch base is, we -- our focus on Q4 and our focus for 2021 as well. So we continue to reduce our costs in order to minimize our cash burn. And also, we have also managed to reduce our breakeven point further in most of our businesses. Our cash outflow increased slightly in quarter 4 to THB 1.6 billion per month, from THB 1.5 billion in the previous quarter, but this was mainly because of the second wave and most hotels being closed in Q4. We also had some loan repayments and some CapEx expenses as well. So that slightly increased our cash burn at about THB 1.5 billion a month. The balance sheet management continues to be our priority. With the waiver, we have managed to get -- we've accomplished 2 milestones. One is the covenant testing obtained until 2022. So we've got 2 years of waiver on the covenant testing. And also, we've also issued additional warrants to be issued to shore up our equity base for another THB 10 billion in 2023 and 2024. We continue to focus on our asset rotation, which I will also update in terms of where we are, the status to minimize or to reduce our debt. The long-term plans, post-COVID, we see that both Minor Hotels and Minor Food will adopt into the changes in customer behavior, which I will also touch base on, some of the new customer behavior patterns, which are emerging as well and how we're going to cope with that. Minor Hotels will focus on management contracts or what we call asset light. We will -- we also will refocus again on the turnout of NH because most of the impact in our results were mainly attributable because of the NH results in Europe due to the fact that they were badly hit by the pandemic. And also, we continue to focus on our digital transformation to improve our customer experience, both on the food and the hotel side as well. In the short term, our momentum in real estate sales has been very strong. Q1, we will have some positive news on real estate sales. So amidst the pandemic, like our real estate sales has been quite strong. And then Minor Food will also focus on the delivery and the digital transformation and product innovation, which is underway and continue to focus on that to improve our results for this year. Looking at Q4, a performance recap. As we stated before, the COVID-19 situation was worsened in Q4, especially in Europe, with the second wave. And as a result of that, the financial performance of MINT slightly declined on a Q-on-Q basis. The improving performance of the Minor Hotels elsewhere outside Europe other than NH and also our Minor Food performance helped to offset some of the deterioration of the performance of NH and also our Lifestyle business. Our Lifestyle business was also affected because of the low traffic in most of the malls or the retail outlets and also the fact that we had to heavily discount to sell the Lifestyle products as well, which actually had an impact as well. So looking at the numbers, if I look at the revenue, the top line, we had a 5% decline on a Q-on-Q basis in revenue compared to the third quarter. And net profit was a negative 7% decline on a Q-on-Q basis to negative THB 4.7 billion. Going into Minor Hotels, our fourth quarter revenue declined by 72% year-on-year. But of course, everyone knows the reason because of COVID, but also 17% on a Q-on-Q basis as well. The second wave -- impact of the second wave predominantly drove this decline for the Q4. We have seen improvements across the business models and also the geographies on a Q-on-Q basis as well, with the exception of the lease business models in Europe. Because in Europe, we have quite a heavy asset-based lease model, which also did impact us on Q4 in spite of getting some lease concessions and lease reduction on our rents as well. Our mixed-use business, with the revenue shortfall, EBITDA and net PAT decline, both on a year-on-year and Q-on-Q basis, despite our cost-cutting measures, but the positive side was that our business in Australia turned to be EBITDA positive. And also our Food group was also EBITDA and net profits as well. Whilst our mixed-use business was profitable at net PAT level for the Hotel group. Our hotels in the Maldives, in the UAE and Australia and Asia performed well in Q4. If I look at Minor Hotels financial performance, when you see the slide on the right-hand side, as stated before, on a Q-on-Q basis, the impact on the lease -- owned and lease business was down by 28% on a Q-on-Q basis. The management letting rights, which was predominantly Australia, was up by 52%, the managed hotels was up by 15% and the mixed-use business was slightly down by 3% on a Q-on-Q basis. If you then look at our performance by geography, it's evident that Thailand was up on a Q-on-Q basis by 16%. Europe was down by 51%. So that's the only geography where we have been impacted and our business is down on a Q-on-Q basis here. Our business in Australia was up by 61%. Middle East and Maldives was non-applicable. And the Americas was up by 332% coming from a low base. So in terms of performance, a snapshot, the -- all geographies performed much better than the previous quarter, except Europe. We then go into the owned and the leased hotels. And here, we look at number of rooms, the occupancy ADR and RevPar. And if you look at the number of rooms, we were slightly down 1% to 54,700 rooms. On the occupancy side, we were down by 12% Q-on-Q. On the ADR, we were down by 6% Q-on-Q. And then on RevPar, we were down negative 42% Q-on-Q. The organic 2020 RevPar growth has been fairly consistent based on the decline we have seen. And the open hotels, again, organic RevPar growth, like we are seeing some improvement in the last quarter. Owned hotels in Thailand and the Maldives, so the first one was owned hotels in total. But now we zoom into just only Thailand and the Maldives. The 2 largest geographies for Minor Hotels outside Europe is Thailand and the Maldives. Hotels in Thailand continue to cater for the domestic business in Thailand and also the, what we call ASQ, or alternative state quarantine, as the borders remain closed in Thailand. We did see a Q-on-Q improvement in Thailand. The hotels in the Maldives started to reopen at the end of September. So we opened our hotels in the Maldives on October 1, and the trend has been very positive. RevPar in the Maldives was almost back to pre-COVID levels in December, which was quite positive. So what we are seeing here is the trend is that as soon as the borders start to reopen, we see the pent-up demand and the demand coming back quite strong into our hotels. And based on the data points of hotels in the Maldives. We then -- the graphs below actually show Maldives closed since April to September. And as soon as we open the hotels started to pick up and almost peak to pre-COVID levels in December, which is quite positive. We then go into hotels and lease hotels in Europe and the Americas. So Europe and the Americas are the largest contributor to owned and leased hotels portfolio. Q4 RevPar for Europe and the Americas portfolio declined 83% year-on-year in terms of euros. And the second wave also did impact us from the end of August. The situation in Latin America and, on the other hand, started to improve during the fourth quarter, given that the majority of our customers in Europe are intra-European travelers, the portfolio is expected to turn around quickly once the vaccines are distributed, which we saw in June and July, when occupancy started to improve after the first wave when the country started to open. But with the second wave and with the second lockdown, of course, we did see a decline again. And here, if you look at some of the organic RevPar decline, it's pretty much consistent across all the European countries, Spain, Italy, Benelux, Central Europe and also LATAM as well. And then our occupancies were down on the fourth quarter because of the second lockdown. ADR was also down and our RevPar was down as a result of the second wave. We then move to our Asset-Light business. So our Asset-Light business actually includes the MLR or what we call the management letting rights, predominantly all in Australia and New Zealand. And together with the other management contracts we have under our various brands, they performed -- the managed hotel was stable in Q4. RevPar of our MLR business actually improved, especially with the opening of interstate borders in Australia and bringing the RevPar back to pre-COVID levels in December. As a result, our EBITDA of the MLR business was positive in Q4. So Australia is coming back, and our business is improving based on how they have controlled COVID and how they have opened the interstate borders as well. So as you can see in the graph below, in December, we were -- our Australian RevPar growth was only minus 1%. We then move to the hotel expansion and the pipeline. So the top half talks about our owned and leased hotels, where this year, we have 12 hotels opening with about 2,000 hotel rooms. The next year, 4 hotels with about 1,000 rooms. And then below is the management letting rights and the managed business, and some of the hotels, out of 19 hotels, some of these been delayed because of the -- because of COVID and the pandemic situation owners are also facing and some of the challenges they have in terms of completing the construction as well. So -- but we are monitoring the progress. And some of them will be delayed to next year. But otherwise, the pipeline is pretty much -- these are signed hotels, and the pipeline is pretty strong. We only show signed hotels in this slide. We don't show the pipeline. Our pipeline has actually increased in the last few months based on what's happening in the marketplace. And one of the other exciting things also, which we would like to highlight, is the signing of the partnership agreement with Funyard Hotels partnership in China. And this will allow us to expand much more stronger in one of the largest markets today in -- globally with our partner based in China for all our brands from Anantaras to AVANIs to NH. And we'll be able to express our growth plan in China. And this has helped a lot. Also, it helps us, once the Chinese board is open for the Chinese mainland tourists also traveling to our hotels whether it's to our hotels in Asia or our hotels to Europe because China is becoming one of our biggest markets as well. So I think this agreement actually underpins, again, our growth, which we have not factored into our pipeline here today. The next one is the mixed-use business. So in terms of the mixed-use business, it includes both residential and the Anantara Vacation Club. And our pipeline in terms of the branded residences, as I said before, we have highlighted what they are and also in the coming years as well. Our Q4 mixed-use revenues declined compared to last year by 76% coming from a high base, but it only declined 3% on a Q-on-Q basis. But the growth was offset by the Anantara Vacation Club, which had some -- which had a strong turnaround in Q4. So the mixed-use business turned profitable at net PAT level in quarter 4 and the full year 2020, the performance also turned profitable at net PAT level as well. The Anantara Vacation Club, our members' profile -- our membership has increased from 14,500 to 15,200 members compared to the same quarter last year. And you can see the membership -- the members, 14% mainly coming from Thailand. 40% comes from China, Malaysia, Singapore, Hong Kong and the others account for the rest. We then move to Minor Food. Minor Food, despite the year-on-year decline on Minor Food for quarter 4, our EBITDA increased by 41% year-on-year, mainly attributable to the performance of the China hub and the Thailand hub, which turned around quite strongly. And the main reason is -- one of the other key drivers is also the effective cost control measures, which we implemented earlier during the year in 2020, and also the net profit of the Minor Food has already exceeded the quarterly 2019 pre-COVID level, which is very strong and very positive. So consequently, the margins have also improved in our Food business as well. So as you can see, our revenues -- even though our revenues last year was THB 6.3 billion, this year is THB 5.8 billion. The previous quarter was THB 5.1 billion. So compared to the previous quarter, we did show a growth. If you look at net profit, our net profit in Q4 2019 was THB 258 million, and 2020 was THB 533 million. So that was just over 106% increase year-on-year. And on our Q-on-Q also showed quite a strong increase from THB 208 million to THB 533 million on a Q-on-Q basis. And that was predominantly driven by China and also the cost-cutting measures, which we implemented in Thailand as well. If you look at the ops statistics, our same-store sales growth has improved versus Q3. Our Q3 was negative 15% or negative 16% and Q4 was negative 14%. So it has slightly improved. Our total system sales growth also improved from the previous quarter of negative 17% to negative 15.5%. The same-store growth in Q4 improved predominantly, driven by our China hub and the Australia hub as well. The outlet expansion, the growth was flat year-on-year. The expansion of the Bonchon outlets in Thailand and Riverside outlets in China were offset by the rationalization of the outlets in Australia, where we had to close some of the outlets in Australia. Total system sales was stable of our outlets year-on-year and total system sales and the system sales growth tracks quite strong compared to the previous quarter. The softer trend in December and Jan was as a result of the new wave, which we saw in Thailand and also in Australia as well. And that's the reason you see that December declined from the month of November. So November, we were picking up. And then December, we dropped, and Jan, we were slightly down as well. We then move to the operational stats by hub. So Thailand, as I said before, same-store sales improved from the previous quarter, both on same-store and also total system sales. Our China hub continues to improve from Q3 to Q4. And as you can see, from Q4 last year, we were negative 1.7%. Q4 this year or 2020 we were positive 3.4% on same-store system sales. And then the total system sales, it's gone from 12% to 8% to 7.6%. And that was in Q4, we were slightly hit by the China -- the hub because of the second wave in Beijing and Shanghai. Australia, again, shows an improvement on same-store system sales growth from negative 18% to negative 7%, and total system sales from negative 25% to negative 15%. So there is a turnaround of our business in Australia there. You can see from the charts below how Thailand has performed. We had some of the second wave and some of the political issues trended down for us in Q4. But China is now above previous pre-COVID levels. Total system sales is much higher. And then Australian hub also has performed, is on the up as well. It was slightly down in December, Jan, and that was mainly because of the second wave in Australia as well. We then move to Minor Lifestyle. So in Q4, our revenues declined 26% year-on-year. It's because of the soft fashion and the home, kitchenware business because of the economic slowdown and also the restrictions which were imposed in Q4 with regards to some of our outlets. Our contract manufacturing sales was quite resilient. From the high demand where we pivoted into producing sanitizers and cleaning products. Despite the cost-saving initiatives, both EBITDA and the bottom line, pre-TFRS, declined to a net loss of THB 117 million and THB 123 million, respectively, from the lower sales flow through and the heavier discounting, which we had to do as well. We also had some write-offs in the fourth quarter in our retail business, which also resulted in a higher net PAT loss for the fourth quarter as well. And the sales and promotions, which we had to carry out with low margins, did not flow through to the bottom line as well. So that pretty much comes to the end -- brings me to the end of the 3 business reviews. I will now go into the corporate information, touching base on the CapEx and our balance sheet strength. Our CapEx plan, including maintenance and renovations and signed pipeline, we did suspend and we have reduced and streamlined from 2020 to 2022. You can see the drop from 2020 to the next 5 years, we have actually reduced our CapEx moving forward, where we will only have the projects which we have started last year. And that will be completed this year. Some of the new hotels, like say, for example, the hotel in Maldives will open this year. We did suspend last year because of COVID and also the challenges in terms of getting construction underway in the Maldives. We had a similar issue in Thailand as well. So we had to suspend a hotel project in Khao Lak in Phuket, which we have started this year and we'll complete before the end of the year, and the hotel will open before the end of the year. And the same with a hotel in Ubud as well in Bali. Again, we hope to open that hotel 3, this year. So we will open all 3 hotels this year in the fourth quarter. And hopefully, by then, we see the situation with regards to the lockdown, the vaccination and also the improving statistics will help us to drive the fourth quarter revenues for the Hotel group as well. We also increased our equity base last year with the issuance of THB 20 billion in perpetual bonds and also the rights issued, which was quite successful. This was netted off as a result of the adverse impact from the adoption of the IFRS and also the net loss we made in 2020. The interest-bearing debt to equity was 1.79 at the end of 2020. The Minor warrant 7, together with warrant 8 and warrant 9, will further strengthen our equity base by adding another THB 15 billion over the next 3 years. The covenant waiver has also helped us for -- we've got 2 years of covenant waiver for 2021 and 2022. And that will also provide more flexibility, based on the uncertain or the fluid situation which we are facing. One of the other things we would also like to highlight is, amongst these issues we've had and what the industry has suffered, we still maintain an A rating with TRIS. So we were kept -- the rating was kept as the same. You can see the internal policy in terms of debt-to-equity ratios and also where we are today, and what measures we have taken to reduce this over the next few years as well. In terms of backup financing, cash on hand at the end of the fourth quarter was about just over THB 26 billion, which is quite strong. We have reduced our cash burn by far in -- during the year as well, which has also helped us to save our cash as well. And also, together with, whether it's CapEx measures, whether it's cost-cutting measures, whether it's lease reductions as a combination of all that and also the Food group helping us to turn into a profit in the third quarter has also helped us with the cash situation as well. The next slide is our response to COVID. So here, we are looking at what do we do when we start to resume business activities and how do we pivot as quickly as possible. The second one is how do we minimize our cash burn and preserve our liquidity going forward through CapEx and cost reductions as well. And also the fact that we've also continued to reduce our breakeven point to speed up the recovery of profit as well. The fourth pillar is managing balance sheet, which, again, we will cover in more detail. And the last one is to embrace the long-term new normal in terms of some of the new business opportunities we see in the industry as well. So we then go to cover the first point, which is resuming business activities. So here, the outbreak of COVID impacted, not only our business, but all the businesses globally. April was our worst month and the lowest in terms of the business activities. And since then, we've seen a gradual increase over the months in terms of Minor Hotels, the number of hotels, which have opened, Minor Food, the number of outlets, which have been opened and also Minor Lifestyle, the number of hotels which have been opened as well. And we opened and closed outlets based on breakeven points and based on whether they are cash positive or cash flow positive as well. If they are not cash flow positive at breakeven point, the outlets or the hotels will remain closed. So as at Jan, we have 32% of our hotels closed, and we have 68% of our hotels open. On the Minor Food, we have -- 7% of our outlets are closed because mainly in touristic areas where there's no traffic. And we've closed them temporarily. And 93% of our Food outlets are in operations. And Minor Lifestyle, all the outlets are open in the malls. So the second one is to talk about minimizing cash burn and also preserving liquidity in terms of cost savings, what we have done as well. So we were able to achieve the highest cost savings in Q2. We achieved about 51% cost savings year-on-year compared to last year. And also, MINT achieved a cost savings of 42% year-on-year as well. So here, these slides show the cost savings on a Q-on-Q basis as well. As I said, Q2 was the highest at 51%. Q3, we achieved 34% as we started to reopen some of the hotels. In Q4, we achieved 41%. Because of the second wave, we had to implement further cost-saving measures in Q4. So Q2, Q3 and Q4, on a combined basis, we achieved about 42% cost savings for the group. We then look at minimizing cash burn and preserving liquidity through cost savings. So here, the chart on the top is what we said we would do. The chart below tracks what we have accomplished and what we have achieved. So what we said we would do in terms of cost savings, we said that 25 -- nearly 25% of costs and expenses and nearly 30% of our budgeted costs we will save. But in reality, we actually achieve much more. So we saved 34% in terms of our cost and expenses and nearly 40% of our budget in terms of cost and expenses as well. So we continue to refine our model, and we continue to look at increasing our savings as well based on the first wave, the second wave and also looking at opening and closing of hotels as well. And most of the contributions, like, as you can see, the payroll, our cost savings, we said we would achieve 24%, but we achieved 30% in terms of payroll cost savings, both on a permanent and temporary basis as well. Leases, predominantly our lease exposure is NH Hotels and mainly in Europe. Out of the 350 hotels we have 220 hotels, which are on a lease basis. We said we would save about 19%. And actually, on the leases, we still saved 18%. So we were almost there in terms of our savings on the leases. Our lease savings for the year was over EUR 90 million, which was quite substantial compared to a total lease cost of EUR 320 million lease cost per year. And then on OpEx, we said we will save about 24%, but we actually saved a significantly higher amount of up to 43% savings through OpEx savings was achieved for the group. So this is what we have done on -- and that -- this has resulted in a reduced production in cash burn as well and also we've managed to preserve liquidity as a result of these 3 measures, which we have implemented during the year. The next one is minimizing cash burn and preserving liquidity through CapEx. So again here, we have reduced our CapEx in 2020 in our previous 5-year plan compared to our previous 5-year plan by 29%. For the hotels, Minor Food has reduced by almost 52%, and Minor Lifestyle by about 34% and -- say, for example, 51% of the reduction comes from NH Hotels and the other projects account for 43% and Minor Lifestyle is 6%. And that's how this chart is read. The -- you can see how we have -- we also target to reduce our CapEx over the next 2 years in order to preserve liquidity and also reduced our cash burn as well. And mainly coming from the hotel sector, in particular, with NH as well, where we have reduced some of the CapExs there also. The next one is minimizing our cash burn and preserving liquidity. So here, you can see our cash burn on a month-to-month basis. Like say, for example, our cash burn was the highest in April and May -- sorry, March was also high at THB 4.3 billion. April was THB 3 billion, May was THB 3.6 billion. And then look at December, is THB 0.9 billion, November was THB 1.6 billion and October was THB 2.2 billion. So therefore, on average, our Q2 cash burn was about THB 3 billion per quarter. Q3, we dropped it to THB 1.5 billion, and Q4 is also flat at THB 1.6 billion per quarter. So with the cash on hand of THB 25 billion, and with working cap facilities of THB 28 billion, our cash burn, based on one point -- even based on THB 1.5 billion per month, we have enough cash to last us for at least the next 12 to 18 months in terms of cash. And this is what we would like to share from a cash perspective as well. The next one is breakeven point. So again, here, we have analyzed our breakeven point by region or by geography. So Thailand, Asia, Middle East and Africa, which is predominantly Minor Hotels, our breakeven point has reduced before cost-cutting from 40% to 48%, now to 24% to 30%. In Europe and the Americas have reduced from 52% to 63% to 33% to 40%. In Australia and New Zealand, we have reduced from 43% to 53% to -- 37% to 45%. So that's a big reduction in terms of our breakeven point. We continue to you look at cost restructure, we continue to look at smart planning in terms of people as well and achieving more cost reductions in this year also. So here, our breakeven point is now at about -- our occupancies today is about 28%, which is slightly below our breakeven point, hence the reason we are making losses at the moment. The next one is, what I mentioned was about balance sheet management, asset rotation strategy, our strategy in terms of asset rotation, which we started actually prior to COVID in 2019. As you know, in 2019, we sold our 3 hotels on a sale and leaseback in Portugal. And then we sold also our 3 hotels in Maldives, which completed in Jan of 2020. We continue -- as part of our 5-year plan, we continue to look at our asset rotation strategy based on yields. And here, one of the highlights is, we've identified, we have 57 identified quality assets which actually have a value of more than THB 100 billion. So asset base is still quite strong. And based on our asset rotation strategy, we plan to look at 2 transactions this year on 4 to 5 selected quality assets, which will give us about THB 10 billion to THB 15 billion of cash. Transaction 1, which is on track, and we hope to complete that by second quarter this year. And Transaction 2, which is also on track, where we have signed the MOU and currently under due diligence, and we hope to complete that in Q3. So what this slide illustrates is that we have high-quality assets in prime locations. We have a high demand for these assets. In spite of COVID, we are able to get some good pricing on these assets. And the low interest rate environment today is also giving us some acceptable yield. And also, we have a strong track record in terms of our past transactions, which we have done in the prior years including 2019 and the early 2020 with our Maldives asset portfolio sale. And we have the ability to scale up or down to an asset size of close to THB 35 billion, if required, depending on the -- how the situation evolves in the coming months. The last one is the balance sheet management in terms of our long-term planning. So as I said before, we were -- we proactively managed our balance sheet last year, raising over THB 20 billion in both -- in the rights offering also and the perpetual bond. And also we issued the warrant last year of THB 5 billion. This year, we have the asset rotation, which I just touch base on, which would give us about THB 10 billion to THB 15 billion of cash. The MINT warrant, which was approved by the Board, and which will be tabled at our AGM, is -- warrant 8 is another THB 5 billion and warrant 9 is another THB 5 billion, which will give us another THB 10 billion in terms of the warrants as well. So this will, over the next 2 to 3 years, will strengthen -- will improve and strengthen our balance sheet further and also reduce our D/E as well. So we have proactively managed our balance sheet in spite of having the waiver for the next 2 years, we have thought about our balance sheet for the next 4 to 5 years and taken measures in terms of reducing our D/E going forward. The next one is the long-term impact post-COVID, how do we see post-COVID in the long term. We are seeing different patterns and behaviors emerging as a result of changing customer behavior and patterns as well. We have 5 pillars again here. We see last minute booking, mainly because of our guests not knowing with regards to the lockdown, with regards to quarantine requirements and opening and closing of countries. So there is some uncertainty there. And that has caused a 40% of our travelers now booking last minute. So we have seen a big shift in terms of booking patterns, which is mainly now trending more towards last minute booking because of the uncertainty in terms of the pandemic issue. We also then look at the range of travel. So predominantly, our range of travel, we are focusing on domestic and local travel for now. We then see regional travel opening up. And then eventually, we will see the long-haul or international travel opening maybe in Q4, and that's how we have planned our business. We look at stay demands. Staycations is becoming a trend these days. People working from hotels, people working from home, and because of the schools being locked down or closed, Staycations is becoming much more in demand these days. Workation, remote working and co-working is becoming a trend. Also extended stays and packages, which we are also focusing on, an increase in privacy and people trending more towards villas or residences booking. And also, what we also see is the other shift is more towards wellness, health and wellness, and people are also booking those packages as well, increasing immune is we have seen the trend increasing as well. And we have launched 4 different concepts based on that in terms of wellness last year. Which is proving to be quite successful as well. And we see once travel -- once the regional and international travel starts to come in, the demand there will be quite strong. We also see a shift in booking channels and also the market segment mix as well. We see the increased use of online channels. And more importantly, we also see the increased use in our hotel booking channels as well. So the brand.com has performed much better than our OTAs, which actually is better for us because our margins improve because we don't pay the commissions, the higher commissions to the OTAs. We also see a growth in leisure travel at the expense of corporate and business today, but we believe that once the borders or even the inter borders start to open this will come back. Generational Travel is something we see the trend. So the population over 60s, the one faster, which we have seen, is growing quite strong. And the different generations travel from grandparents to grandkids, also, we have seen the increase there as well. And the Gen Z, we see that the Gen Z will overtake the Millennial travel in the future as well. The next one is, it's again a snapshot to share the 5 stages of the hotel booking reset. So basically, when the pandemic started, we started focusing on domestic within plateaued based on that. We went into a flux with the second wave and in some countries, the third wave. And that's where we are today. And based on that, we then keep going back in certain countries where we go back to domestic travel starting again and starting from a lower base. So I think where we are today is we are in the stage of flux. And hopefully, we see coming out of flux with the vaccines and the vaccinations. And also borders opening and restrictions being eased and the quarantine requirements also being released or eased, we then see the pickup coming quite strong in terms of the demand going forward. So that's where we see that the international travel will start to happen. In terms of embracing, we see more of a domestic bookings coming through and the domestic bookings will start to increase, and that's where we are today. We then look at Minor Hotels, post-COVID world. So we have taken into consideration some of the new behavioral patterns, new customer behavioral patents as well, including hygiene measures and wellness in our hotels. So we are focusing on delivering customer experience through our loyalty program and strengthening our brand equity as well. Digital transformation and economies of scale is quite important for us to pivot again. Balance sheet management and asset portfolio management, again, is also one of the important factors, which we have highlighted. And the last one is the delivering on the NH business plan, again, based on the -- where we are today into a flux stage going into a recovery and going into a new normal as well. On the Food side, we see the trends, again, in terms of customer behavior. And we have adjusted our business model based on that also, both in the medium -- short, medium and the long term. The global pizza players are investing heavily today on digitalization and e-commerce, which we have seen, would have done the same. We -- and our results have proven to be quite strong. As a result of that, Minor Food in Q3 and Q4 were profitable last year. We continue to grow our global online food delivery market and also becoming a marketplace and creating the 1112 platform, which has also proven to be quite successful as well. The rise of Cloud Kitchens, which again we have done last year, where we see the rise of Cloud Kitchens is becoming a new trend, and we see that we are driving more delivery and takeaway through the expansion of our Cloud Kitchens as well. The next one on the Minor Food is what we call the digital transformation. And Minor Food aims to deliver a seamless pro tool, which is online to offline experience to the customers. And there are 9 key elements on this digital transformation. So the first one is about marketing and loyalty, again, which we have done. Data analytics, we are -- we have more -- we have created the data lake across all our brands. Over to the next slide. Sorry. Delivery fleet, we have increased because of our demand coming through our brand or our delivery platform as well. The core technology, we have strengthened and also, we have strengthened the operating systems and the training as well to make sure that our core business is implement -- or is complemented with the Cloud Kitchens we are creating. We also have launched what we call the Minor Food Innovation Team or MFIT as a center for excellence, where we are bringing out new concepts, new menus, new experiences on the food side. Burger King, for example. Burger King just launched yesterday, a plant based -- 100% plant-based burger, which is, again, a new innovation, which we've done in terms of adding a new concept to our food brands also. Similar to that, we have also launched new concepts across all our food brands, from Pizza Company to Bonchon to Burger King to Sizzler, Swensen's, Dairy Queen, and everything else. We've also increased our touch points in our brand apps and also our websites as well. We continue to refine and modify and enhance that to make sure the customer experience is seamless there. We've also increased our customer service channel as well as a result of the high demand for deliveries and takeaways as well. So that brings me to the end of the presentation. And I would like to open up for any Q&As. Happy to take Q&As. I've got Brian, and I've got Big as well here. So happy to open up the stage.

[Operator Instructions] Let me start with the first question from the queue. Do you any idea what's the impact from the expiry of the temporary COVID relief accounting? Would you have to book provisions in this upcoming quarter?

Thank you, Camille. Maybe I can take that question. Yes. So effectively, for all the impairment analysis, which the company will be reflected to disclose the impact in our Q1 financial statements in '21. We're currently updating all the projections and the analysis. So that, that impact will be reflected in our Q1 financial statements. What I would say is, as a defensive measure, we did work with our bondholders and our banks to secure a carve-out for impairment. So in terms of the impact of impairment in our financial covenants, we have a carve-out of that impairment impact for 4 years that, that will give the company a stable platform to execute the balance sheet, management and asset rotation strategies over the next few years. In addition to that, I would say the company is increasingly optimistic around what a recovery will look like from COVID. Obviously, given the high efficacy rates of the various vaccines that have been rolled out, including the J&J vaccine, which I think is a bit of a game changer, and that is a one-shot solution in terms of COVID. So increasingly optimistic around what a recovery would look like. Impairment will be reflected in the Q1 financial statements. And we have a -- secured a carve-out for that impairment impact for the next 4 years.

The second question is, is there any plan to sell the NH shares?

Maybe I can take that. We are looking at all options. So I think at the moment, the plan to sell NH shares, as you know, because of the low liquidity, the share price is quite suppressed. We are -- NH has an asset base of over THB 2 billion -- EUR 2 billion, sorry, the asset base. NH is worth about EUR 2 billion in terms of freehold assets. So we are more looking at asset rotation and seeing how we can better leverage that from a cash flow perspective and also from a yield perspective as well.

Continuing on the asset rotation. For the asset rotation transaction that will happen this year, what are the locations of the assets? And when we sell the assets, is there any impairment, what's also loss regarding the transaction?

Yes. So as we have stated before, we have -- this year, we have Transaction 1 and Transaction 2, and they're both predominantly NH assets. And this will help us with the cash coming in, in Q2 and also Q3, which will also help us to reduce our debt. As a result of the sales, on a net-net basis, we don't see an impairment for both transactions on a net-net basis for the full year. Saying that the first transaction, there might be some impairment, but it will be offset against the second transaction.

I think we have the question from the floor, [indiscernible].

So I have 2 questions. So the first one is on NH Hotel, right, particularly in Europe, right? So it looks more likely that it will need to rely mostly on the local continental European guests for this year, right? If that's the case, right, can it make -- like even on EBITDA or net profit level without the long-haul international travelers help? So that's my first question.

Yes. So that's a good question. I think if you look at the NH model, their assets, predominantly sitting on high-end urban city locations, which is mainly catering towards domestic or inter-European travel. And as we saw with the -- after the first COVID wave, and when the lockdown measures were eased, actually, the NH Hotels turned GOP positive because the trend started to -- the business came back quite strong. So therefore, we believe that NH doesn't -- the international business for NH is -- the segment is very, very small. It relies mainly on domestic and inter-European travel. So therefore, we don't see a huge impact on NH, once the board is open. And once the travel is allowed within Europe, we will see the demand coming for our hotels.

I see. So that implies you believe recovery in NH can come early than a year, right? Because if the vaccination is complete in Europe, which now most of the European government already procured enough vaccines for their citizens, right? So that means the intra-European coverage can resume more quickly than long haul?

Yes. So we are monitoring the situation quite closely. And when we look at our booking trends on the books for NH in Q3 and Q4, we see the demand coming quite strong in spite of uncertainty today. So I think as soon as -- the critical success factor here is the vaccination. And as soon as the European countries, they vaccinate and they allow free travel within Europe, I think we will have NH come in quite strong. We believe that the -- our summer, based on SDR and based on some of the other reports, the summer in NH could be quite strong, which is September, October. By then, we would hope that most European countries will be vaccinated or at least the majority of the population will be vaccinated by then, and the borders to open and the restrictions to be lifted. And therefore, NH will then come back quite strong. I think on a cash breakeven, hopefully, NH should be able to start to break even from the month of May or June, which will be post-Easter. I think most countries will not open for Easter because they don't want to see another wave. And then I think post-Easter, and together with the vaccination, once they start to open, the business will come back quite strong in that segment.

And my second question is on the asset rotation that it's ongoing right now, right? Could you please share with us on what the guidance on the EV/EBITDA model that you are looking to sell based on the normalized EBITDA? Is it still the same like in 10 plus or minus like before the pre-COVID-19 term? Or is it become more distressed in terms of the Maldives report that you can get?

Well, I think there is 2 things here. Our focus is, like what we did with our assets in Portugal, is not to lose the earnings potential of the assets. So say, for example, in Portugal, we sold our 3 hotels in 2019 for EUR 300-plus million. And we managed to keep the hotels under the sale and leaseback with a 4% cap. And it's quite -- it's a win-win because we also managed to keep about 60% or 65% of the EBITDA from those hotels going forward because we have to be careful that by selling the assets, we don't want to lose the earnings potential of these assets going forward because we want to make sure that the business is sustainable, and the business continues to grow. So therefore, by doing the asset rotation on a sale and leaseback, we will continue to enjoy the EBITDA moving forward. And also, we are looking at about a 4% cap that's what we would aim to achieve. And the demand is very strong. And the good thing is that these assets are almost considered as trophy assets in key locations, and therefore, the investor appetite is quite strong because also, as you know, the interest rates are quite low in Europe as well. And that has helped us to -- not to discount too much and to make sure that we get a fair value on these assets because if the assets are -- because as we know, like some of the private equity funds and some of the distressed funds today are looking at 20% to 30% discount, which we will not sell our assets. So we will not do that.

Yes. And on that regard, right, do you need to provide a guarantee for a rental with this investor, maybe in the first 1 to 2 years, when the COVID-19, so no, right?

No, we don't. So the deal is the same as prior years, how we have structured the sale and leaseback model with the basket.

I've got question from the chat. I think this one is for Brian. Any refinancing plans for the U.S. dollar perpetual bond that will be matured this year?

Yes, sure. Thank you. Yes, in terms of our broader funding plans this year, we're looking to, firstly, tap up the Thai covenant bond market in Q2. So we're actively in negotiations of that in relation to that. We have, as [indiscernible] is pointing out, we have a first call date on our U.S. dollar perpetual bond at the end of this year. So we're actively working on a potential liability management solution for that instrument.

Okay. Some more questions on the financing side. Why did the interest payment drop in the fourth quarter? Any highlights would be appreciated.

Sure. Yes, I guess there was 3 factors essentially. Firstly, we did have a marginal decrease in our interest-bearing debt from Q3 to Q4. Secondly, our average interest costs dropped due to interest rates -- average interest rates dropping in the quarter. And I guess, lastly, we have basket leases in the NH business. So in Q4, we recognized savings on those leased baskets. So these are our assets in the European portfolio, whereby we have a lease basket arrangement. And essentially, we recorded savings that were negotiated by the NH team in Q4, and that resulted in a reduction in our interest related to those NH assets.

1 more. I'm trying to -- so I think the bond payment fee of 0.5%, where -- this will be for -- sorry. Okay. I think the question is the additional fee of 0.5%, whether it's going to be paid to bondholders in the form of fee or interest in the near term for the covenant?

Okay. So upfront fee, basically. So upfront fee. So it equates to approximately 25 basis points a year at upfront. Yes, correct. Amortized over the next -- over the life of those instruments.

So in terms of fee or interest?

A fee.

It's a fee.

Next question. How sustainable is the cost-cutting measures going forward? Will it be maintained at this level even after COVID?

No. I think on the cost-cutting measures, we have both permanent cost savings and temporary cost savings. The temporary cost savings arise because of the low occupancies and how we managed to run our business with low inventory or closing hotels. So as the hotels start to open and as some of the outlets start to open, these costs will come back, but I think the majority of the costs will remain as a permanent saving. In terms of the payroll, for example, we looked at savings of about at 37% compared to budget and 30% compared to last year. We continue to restructure our business model and also the -- what we call smart people planning as well. We will have more savings this year because -- and especially coming from NH due to business restructure we have to do. And that will help us with further savings. And therefore, we hope to maintain at least a 25% savings on our payroll costs going forward. The lease cost savings will not materialize on a permanent basis because the lease cost savings are mainly because of the closures of our hotels and therefore, we've got some lease concessions from our partners or landlords. That savings will not materialize once the borders start to open and once we open our hotels fully. But we do have some savings on the leases as well. As a result of -- what we did was we also converted some of our fixed leases to variable lease. So therefore, there will be some savings coming through that model, but not as much as 25% on the leases. And the other OpEx, the savings we are achieving 43%, is mainly because of some of the hotels are closed, and we managed to reduce our costs. Once a hotel start to open, some of these costs will come back. But again, here, we hope to maintain about 10% to 15% of savings going forward on the other OpEx as well.

What's the expectations of cash burn per month in 2021?

So the cash burn, we have -- as we have shown in Slide 34, we were at about THB 1.4 billion, THB 1.5 billion average a month. We will continue to see that based on if there is not much recovery happening in Q1. And as you know, Q1 is a low quarter for NH because quarter 1 has always been a low quarter, but we are getting some rent savings, which we will account for in Q1 as well. So hopefully, we will try to maintain the cash burn around at that level.

Okay. One more question on the finance side. Can we use the fourth quarter interest rate? Can we use the fourth quarter interest expense as a new benchmark for 2021 and beyond?

Yes. So again, as, I guess, 3 factors that were influencing the interest expense in Q4. The reduction in debt, I think, is stable. So we will see the savings related to that. The interest rate, I would suggest we will see incremental savings due to the low interest rate environment. And there was some lease basket related interest expense, which involved our catch up for some of the years. So some of those savings will not be replicated in Q1. But I think the headline is slightly less debt and a better -- lower interest rate environment will support lower interest rates and lower interest expense, yes.

And also, like we will see in Q2 and Q3, with the sale of the assets of anything from THB 10 billion to THB 15 billion, that will also go to reduce our debt, which will also reduce our interest costs going forward as well.

Can you please update on the partnership in China? Would this be significant in hotel portfolio in the long term?

Yes. Funyard Hotels or Country Garden Group, they are a highly reputed company in China. They are growing quite aggressively. They do have some third-party brands like Hilton as well. And we believe with the signing of our brands, which are considered as global brands, which have a global presence. And for them to be able to work with us in terms of promoting Asian tourism and also European tourism as well. This could be a significant milestone moving forward in terms of our pipeline and creating hotels under our different brands in the different cities in China as well. We have seen how China has rebounded, like especially our Food group has done really well in China, and they continue to do strong as well. And we also see the emergence of Chinese tourism as well, both domestic and international also. So the domestic demand is still quite high. And therefore, with our brand presence in China, this will help us to expand our portfolio presence and also expand our brand presence throughout as well.

Across EU, Asia and Australia, have you noticed hotel competitors materially cutting back growth plans or any difference across hotel classes like 3 Star, 4 Star, 5 Star?

Yes, we have. Mainly, there's been some shrinkage in terms of the pipeline because of investors and owners not being able to continue with their pipeline or their construction as a result of COVID. COVID has created some challenges. Hospitality sector is not seen as an attractive sector at the moment with funding institutions like the banks. So therefore, there's been some squeeze in terms of funding, but most of the owners will start based on our take, we'll start their construction as soon as they see the improvement in the sector, which will be, hopefully, towards the end of the year, and the pipeline will start to then work next year.

I think that's all the questions that we have from the chat. So if there is no further questions, thank you for attending the analyst meeting. And if you have any further questions, please feel free to get in touch with the IR department. Thank you.

Thanks very much.

Thank you, yes.