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

[Foreign Language] Good morning, and welcome to Minor International First Quarter 2022 Analyst Meeting. It is our pleasure to introduce our presentation, and as you'll hear from Mr. Chaiyapat Paitoon, our Chief Financial Officer; and Ms. Namida Artispong, Investor Relations Director. [Operator Instructions] And now I would like to hand over to Mr. Chaiyapat Paitoon to start on the presentation.

Thank you. Good morning, everyone, and welcome to Minor International Company presentation. Welcome all analysts, investors and our banking partners. Today, agenda as usual, we'll start off with a recap of the results -- first quarter results of this year. And then we will deep dive into detail of each business units, and we will share with you our operating stats, the recent development of each BU and then we wrap it up by our other corporate information and how we position ourselves for the recovery that's happening right now. And then finally, we'll look into the business outlook going forward and our strategic priorities for the rest of this year. But first of all, let me start off with the first quarter 2022 key highlights. What happened is that we start to see a strong recovery all across the board. And for our results, our results improved year-on-year. Our core EBITDA surged more than 5x in the quarter. And then this is our 13th successive month of year-on-year core EBITDA growth, while at the bottom line level, core losses narrow by 31% to THB 3.6 billion. And then this is coming from remarkable recovery of Minor Hotels and also profit turnaround at Minor Lifestyle. And we look at our key business units, start-up with Minor Hotels, core EBITDA turned toward -- to back to positive territory in this quarter compared with the quarter in the prior year -- same quarter in the prior year. And if you look at the bottom line of Minor Hotels, core loss narrowed to THB 3.7 billion versus core loss of THB 5.3 billion in the first quarter of the previous year. This is as a result of the revenue growth and operating efficiency enhancement program that we implemented all across the board. Minor Food, we also see EBITDA improved by 8% year-on-year. And at the bottom line level, Minor Food still report profits, and this is seventh consecutive quarter already that Minor Food report profit at the bottom line level. In this quarter, in particular, this is attributable to a strong growth of our Thailand hub. And then this is despite the lockdown that happened in China, and we will talk about it in detail in subsequent slides. And if you look at second column, we talk about the overall operating environment. Here you can see that hotel industries start to see recovery across the board given vaccination that start to roll out globally since last year. And then a lot of countries start to treat COVID-19 as the endemic or common disease. So mobility starts to flow, people start to travel again. And then particularly in Europe, we see a lot of mobility going on since last year, but it was disrupted temporarily by Omicron at the beginning of the year in January. But since March, we start to see strong recovery up until today and hopefully going forward. For Thailand, Test & Go program and Sandbox schemes were abolished on 1st of May for vaccinated travelers, and we expect that the abolishment of Thailand Pass will be probably at around 1st of June of this year. So that further relaxation and -- of the travel restriction without quarantine will help us to see a recovery all across the board. So as Australia, which commenced no quarantine policy since April of this year. And RevPAR of our management letting rights business in Australia also already above pre-COVID level in the first quarter of this year. Maldives, already surpassed pre-COVID level. Performance pretty strong since last year, and it continued to be strong in the first quarter of this year as well. In terms of balance sheet management, we continue to see if we can save costs or control our CapEx where possible, despite increase in business activities. So -- and if you look at our leverage ratio, our net interest-bearing debt to equity now stood at 1.51x, which is already below debt covenant level of 1.75x, even though the debt covenant waiver was secured throughout till the end of this year. And we still have ample liquidity with THB 20 billion cash in hand and another THB 32 billion of unutilized credit facilities at the end of April 2022. So liquidity is not an issue here, like as we emphasized since last quarter. We also successfully raised or issued THB 7 billion of unsubordinated and unsecured debentures in the first quarter of this year on MINT E bond. So that also bodes well for our proactive balance sheet management and refinancing activities. So if you look at our cash flow, operating cash flow remained positive, while free cash flow improved year-on-year as well, even though we are in the mid of low seasonality in the first quarter and despite Omicron in the very -- at the very front end of the quarter. Another good news that we had this quarter is that Fitch Ratings also upgraded NHH rating from B- to B. And also revised the outlook from negative to stable as well. So this has happened on the back of the recovery that we see quite visibly over the past few months. Lastly, to highlight, we continue to strengthen our platform and our foundation to position ourselves for the demand recovery. Minor Hotels continue to strengthen the brand, come up with sales initiatives and product and service offerings. The expansion at the current moment will probably going to focus on asset-light strategy on the back of our cost preservation or liquidity preservation mode to preserve cash in the near to medium term. And Minor Food, we also adapt the sales strategy is come up with new product innovation, brand revitalization and then strengthen sales channel, distribution channels all across the board and then also selectively expand our outlets with a more innovative outlet format as well. So long term, we would continue to focus on customer experience, product innovation, digital transformation and sustainability for both Minor Hotels and Minor Food. So that's the highlights for the first quarter results. In terms of numbers, I'll show you very quickly in the next slide. We see our core revenue increased by 66% year-on-year on the back of the recovery that I just said from hotel -- businesses all across the board as well as the strong restaurant performance in Thailand. At the bottom line level, we see significant improvement with core losses narrow to about THB 3.6 billion in the first quarter. That was mainly due to Minor Hotels narrowing loss and Minor Lifestyle return to positive profit in the quarter. So next slide just to show you the split and where we operate. We -- at the moment, we have our footprint in 63 countries across various businesses that we have. The split between international and Thailand is 73% and 27% at the moment, mainly driven by our businesses in Europe. Next session will be, we will deep dive into each business units. I will hand the floor to Namida to share with us some of the operational results of each businesses. Please.

Let's start with the first business unit, which is Minor Hotels. Minor Hotels' revenue doubled year-on-year, and this was due to higher travel activities of both leisure and corporate segments. If you look at the performance snapshot by business, you would see that year-on-year improvement of revenue has been seen in all business models, including Owned & Leased, Management Letting Rights, and also Managed Hotels, except for the Mixed-Use business, we saw a 51% decline in revenue, and this was due to the mismatch of the real estate activity. In terms of the business performance by geography, all of the revenue performance has increased in Europe, Australia, the Maldives and the Middle East as well as the Americas. But for Thailand, Thailand posted 17% decline in revenue, same thing due to the lower revenue of the real estate business. Having said that, the revenue from Minor Hotel operations in Thailand, the performance more than doubled year on year. In terms of EBITDA, EBITDA turned positive in the quarter while net losses narrowed down from core loss of THB 5.3 billion to THB 3.7 billion. And this was due to the solid pricing strategy, our higher operating efficiency level and also the higher flow-through from the revenue increase. Although the residential business unit revenue declined year-on-year, but at the bottom line, the performance remained profitable at NPAT level. So as the first quarter is typically the lowest travel season, therefore, we expect stronger performance in the upcoming quarters in the second quarter, third quarter and the fourth quarter. Driving down to each business model. First, Owned & Leased. Owned & Leased, number of owned has been flat year-on-year in the first quarter, but has increased slightly by 3% compared to the same quarter of 2019. In terms of RevPAR, RevPAR more than tripled year-on-year and this is being driven by both higher occupancy rate and also the ability to average -- to uplift the average room rate. You would see that throughout the quarter, RevPAR has improved month-on-month. And quarter back in April, you have -- you would see a very strong rebound in RevPAR. And this RevPAR in April has been posting on the 2019 pre-COVID level already. Moving into each region, first the Europe and the Americas, which are our largest contributor to our Owned & Leased hotel portfolio. The RevPAR hotels in Europe and the Americas nearly quadrupled year-on-year, and this was driven by both occupancy rates and also our ADR maximization strategy. If you look at throughout the quarter in the first month in January, the operating activities was impacted by Omicron and low seasonality. But as the COVID cases subsided in the remainder of the quarter, you would see that occupancy rate improved month on month. Occupancy rate improved from 28% in January up to 41% in February and then 52% in March. If you look at the graph on your bottom right, we would see that RevPAR was still 40% year-on-year below 2019 pre-COVID level. But if you look separately, you will see that the discrepancy was from -- mainly from the occupancy rate. But if you look at the room rate, the room rate in the first quarter was very solid at EUR92, and this was only 3% below pre-pandemic level. If you look at the stat in April, the performance has been very strong. In terms of occupancy rate, occupancy rate was accelerated to 63% in April from 40% in the first quarter. And this was versus 72% in 2019. Nevertheless, ADR has surged a lot and it has been 11% exceeding pre-COVID level at EUR118 per night. Therefore, this resulted in the RevPAR only 3% below pre-COVID level in April. And outlook for upcoming summer season appears to be very encouraging. With occupancy, we further accelerated and then it is expected to approach the pre-pandemic level by mid of the year. Next one will be Thailand. Thailand RevPAR surged about 2.5x, and this was due to the country reopening for the international tourist arrival since November of last year. If you look at the occupancy rate on month-on-month, the occupancy rate went up in March, and this was due to the further relaxation of the testing in the month. And in addition of that, the domestic tourism was boosted by the government's stimulus measures as well with the subsidies for hotel stay, airfares and local spending for the local travelers. If you look at the stat in April and May, in April and May, occupancy rate has ramp-up again to about like mid-40s in the 2 months compared to 31% in the first quarter. And we expect a much faster pace of recovery for hotels in Thailand as Test & Go and SandBox was already abolished on 1st of May and the cancellation of Thailand Pass registration is expected to take place in the 1st of June. Next is the Maldives. So for the Maldives, the strong operation rebound continued in the quarter. RevPAR increased 63% year-on-year in the first quarter. If you look at the graph at the bottom, you would see that our RevPAR was already above 2019 pre-COVID levels since third quarter of last year. And for this quarter, in first quarter 2022, RevPAR was almost pre-COVID level by 25%. Look at the stat in April, the occupancy rate taper off a little bit to 61% in April compared to about 72% in the first quarter. But this is -- because hotel tourism in the Maldives is entering the off-peak season in the second quarter and third quarter of the year. Nevertheless, robust recovery in the Maldives will continue to be seen year-on-year. Moving to asset-light business model. The first model is our Management Letting Rights in Australia or MLR. So if you look at the hotel performance of MLR, it continued to be resilient and the RevPAR has been growing by 25% year-on-year in the first quarter. And if you look at the graph at the bottom, you will see that RevPAR compared to 2019 pre-COVID level was supported by 5% already in the quarter. And looking at the stat in April, it is very strong and encouraging. Both occupancy rates, ADR, accelerated very strongly and the RevPAR was way above pre-pandemic level by 49% in April. In particular, this was from the pent-up demand, also a higher number for event and particularly Sydney and Melbourne saw a very good recovery on the back of recovering in corporate MICE segment market. And look at the booking pace across region in May and June, it also accelerated as well. Our next business model is Managed Hotels. Hotel under management contract, RevPAR doubled year-on-year, and this was attributable to a strong recovery in all regions, including Europe, Thailand, Maldives and also the Middle East. In terms of hotel expansion, in the short to medium term, Minor will expand our hotel portfolio, especially through our asset-based business model because we are still in a cautious mode and it still implement cost and CapEx reduction for this year. Therefore, you would see that we'll be expanding 11 owned and lease hotels for 2020 and '22 compared to nearly 15 hotels of management contract hotel in the next 3 to 4 years. Moving on to mixed-use business. Revenue of mixed-use business declined by about like 51%. And this was mainly due to the mismatch of real estate sales activities compared to last year that we mentioned earlier and also the lower total points of the Anantara Vacation Club amidst several lockdowns in China. Nevertheless, the mixed-use business remained profitable at bottom line for the sixth consecutive quarter. In terms of residential development, we have currently 5 projects that are available to sell. And we still have 2 -- at least 2 new more projects that are under construction currently to be launched this year to ensure the continuous pipeline of MINT real estate business in the upcoming years. Moving on to next business unit, Minor Food. For Minor Food, Minor Food's core revenue increased by 25% year-on-year, and this has been reflected in the operational stat in same-store sales growth and total-system sales growth. In the first quarter, same-store sales rose -- grew about like 4.2%, and this was due to the increase in traffic in our sales channels in Thailand hub, following the ease of the COVID-19 restrictions. And in terms of outlet expansion, the network grew about like 2% year-on-year as reflected in total system sales growth of about like 11.5%. And in the same reason, the strong total system sales in Thailand could totally compensate for the challenging operating environment of China and Australia due to the lockdown in the first quarter. In terms of EBITDA, EBITDA grew 8% year-on-year, but it grew at a slower rate than revenue while NPAT declined by about 37%. And this was due mainly to the weaker business environment in China. But if you take out -- if you give China was doing well and take out the loss from the contract manufacturing from the internal business restructuring, the impact level of Minor Food is still doing very strong. Although the entire level of Minor Food was down year-on-year, but the performance, it has been profitable for 7 consecutive quarters already. Drill down into each half for Thailand. Thailand, same-store sales grew about like 12.4%, and this was due to increased traffic in all channels, especially the dine-in business. And together with the outlet expansion, total system sales grew almost 20% year-on-year. And in the quarter, all of our brands in Thailand achieved positive same-store sales growth. If you look at the same-store sales growth in April, for same-store sales for total system sales force remain in a positive territory, and this is due to positive for operating environment on Thailand. And we expect the performance of Minor Food in Thailand still continue to be positive as restaurants right now are already operating at regular hours and normal dine-in seating capacity in all cities. Moving on to China Hub. For same-store sales, China started the year with positive note with solid same-store sales growth in January. But if you look at the full quarter and first quarter, same-store sales declined by about like 15% year-on-year as COVID outbreak in several cities led to dine-in restrictions declining customer traffic and also some of the temporary closure of some stores. Nevertheless, because of the successful store expansion of our Riverside brand, total system sales decreased at a smaller magnitude, decreased at about like 2.2%. If you look at the stat in April and May, same-store sales growth was still in a negative territory, but we foresee that this will be the trough for China already and we will see positive rebound afterwards. The restrictions in China are expected to be lifted in June as the number of COVID cases is declining. And also, the V-shape recovery is expected after the lockdown and as our past experience has shown given to our strong brand concept of Riverside and also our operational excellence. Moving on to the last half of hours on Australia. Total system sales in Australia declined by 5.1%. This was still mainly to decrease in same-store sales of about like 8% from the lower business activity, amidst lockdowns and flooding. Nevertheless, you would see that the month-on-month sales trends have improved throughout the quarter as the ease of COVID restriction has been seen in the remainder of the quarter. Although the total system sales declined, the business remained profitable, given our earlier store rationalization strategy, which helps our store portfolio to become more resilient and profitable. So looking ahead, you will see that same -- total system sales in April has rebound back to positive territory. And Australia has to continue to drive its dine-in sales via new marketing campaign. Our last business unit is Minor Lifestyle. Minor Lifestyle revenue declined by 27%, and this was solely due to the internal business restructuring that we classify the contract manufacturing to Minor Food. If you exclude such impact, revenue rise 14% year-on-year, and this was driven by both the Fashion and Home & Kitchenware business category. And because of less discount campaigns, continued cost control where possible, our better rationalized portfolio, EBITDA improved significantly year-on-year while net loss has bounced back to profitable territory in the first quarter 2022. Now I will return to Chaiyapat.

Thank you. Next session, I would like to highlight the activities that we did at the corporate level and also some activities that we did at the BU level to strengthen our platform foundation to make ourselves ready for the demand recovery. First of all, I just want to call out the proactive balance sheet management. This slide show you activities that we have done over the past year as well, like last year, but something that I want to call out that we did in the first quarter is that we successfully issue a Thai Baht bond, corporate bonds of THB 7 billion in March 2022. And this -- the proceeds has been used to repay or refinance our existing debts that are maturing. Another thing that I'd like to call out is that in each level, Fitch Rating has upgraded NHH rating to be with the outlook also upgraded to stable. So -- and its senior secured debenture rating was also upgraded to BB-. This rating has reflected the ongoing business recovery and also improved liquidity at NHH level. On that, the rest is pretty much what we highlighted already in the previous quarter. We have done -- we issued bonds, we issued U.S. dollar perpetual bond, and we also extend the waiver of covenant testing. We also did asset rotation in the previous year with 3 transactions, sales and manage back of Tivoli asset sales of 40% interest in 5 assets in Thailand and the sales and leaseback in each hotel in Spain. So those are something that we already reported to you last quarter. Also, the equity base has been strengthened as a result of net land revaluation surplus that we did at the end of last year. And we also still have 3 tranche of warrants to be -- it's already being exercised partially, but it's going to bring in more equity proceeds or strengthen our equity base by about THB 15 billion over the next 2 years up to 2024. NHH level, they have done pretty much the same. They have extended the maturity of some of their debts. They also extend the waiver of their covenant testing. They also proactively managed their balance sheet and liquidity, and that result in the rating upgrade, which bode well in the previous -- in the previous quarter. So let's move on to next slide, just to show you some of the balance sheet stats. We still continue to preserve or cautious spend on our CapEx. Our CapEx this year and also the previous year has been slashed from our original 5-year plan. So this year, our CapEx will hover around THB 6.4 billion, but it's probably going to rise alongside business activities and the stronger balance sheet in the upcoming years, but it still hover around probably THB 10 billion in 2023 and 2024. For our leverage ratio, like I said earlier, it has -- it currently stood at about 1.51 in terms of net interest-bearing debt to equity. And if you exclude the impairment from COVID-19 from our equity net interest-bearing debt to equity, it will come down even further to about 1.46, which is below -- well below our debt covenant ratio, even though we have already secured debt covenant waiver through until the end of this year. So the back-up financing, I already mentioned that we still have more than THB 30 billion of unutilized credit facilities. And we also have proceeds from warrant by about THB 14 billion to THB 15 billion to come in over the next 2 years. Next slide, just to show that we still have ample liquidity with positive operating cash flow. If you look at first quarter of this year, operating cash flow remained positive at 3.9%, while free cash flow adjusted for advanced deposit for Corbin & King was also reduced year-on-year compared with the first quarter of the previous year. Free cash flow, I have to say that it was typically soft in first quarter in the mid of the low seasonality, but I think it will improve and turn back to positive territory in the following quarters, given the business recovery that we see across the board. Also cash on hand of THB 20 billion and working capital facility is THB 32 billion at the end of April, also provide us with enough liquidity to endure a weather, any uncertainty that can happen. So liquidity, it's not an issue here. Moving on to next slide. We've got a few questions from investors and analysts in terms of the impact of inflationary pressure on our operation or our performance. and potential cost increase that would happen. We foresaw this rising trend of cost in certain areas, including wage, raw material, packaging and energy cost, and all that. What we have done is we have implemented proactive supply chain management. We start building stocks, lower cost raw material and packaging were built up or accumulated since last year. So we can delay this adverse impact at least until the middle of this year. And we also did a long-term contract, a future contract with our -- with multiple suppliers. So we also diversify our suppliers use more than one to create competition in order to obtain a better bargaining power. And we would also selectively did some price increase in some of our menu items, especially on the food side. So price increase will also help alleviate this impact to a certain degree. We also implement what we call product and menu reengineering to bring down raw material price increase in a sense that we probably highlight some menu that has inexpensive raw material ingredients and also reserve some of the more expensive ingredient as a premium menu. That's just an example of how we did in terms of menu reengineering just to alleviate this impact. On top of that, as I said for several quarters already, we have done a very stringent disciplined cost control, cost reduction program during COVID period. So -- and we still do where possible. So that cost control and cost reduction help us to safeguard our margins and our profitability to a certain degree as well. We also streamline our Manning Power, the Way of Work. We -- our people are now more productive than before. We also use digital transformation and technology to help increase productivity as well. And that would also help safeguard and alleviate -- safeguard our margin and profitability and also alleviate the impact on inflationary pressure. So we will continue to do so with our leaner and more efficient organization going forward. Next session, we'll talk about business outlook. Namida probably touch a little bit here and there already for each of the BU. But for Minor Hotels this year, the outlook for key markets, I just want to start with Europe. We start to see mobility, as I said, because most of the European nations treat COVID-19 as the end of the pandemic already and treated as common disease and they live their life back to almost normal. So with this, we would probably see more trouble, more higher occupancy. We start to see swift leisure demand recovery. And in terms of business traveler, we also see the reactivation of business travel as well. And then with our solid pricing strategy or ADR maximization strategy that we implemented since last year, that will probably pay off by having us seeing our RevPAR growth -- strong RevPAR growth when occupancy start to climb back to a normal level throughout the remainder of the year. In April, occupancy in Europe was over 60% already versus 72% in 2019. ADR, it's already at -- average ADR is already at EUR118, 11% higher than the pre-pandemic level. And the outlook for the summer season like Namida mentioned earlier in Europe, appears promising with occupancy rate expected to approach 2019 level by mid-year. If you look at Thailand, the Test & Go scheme, Sandbox scheme was eradicated on May 1 of May 2022. So RT-PCR tests upon arrival and quarantine are no longer required while COVID insurance coverage requirement was reduced in half for Thailand. So that provide more convenient and more - and led to a decision for tourists to travel to Thailand more and more. And we hope that there will be cancellation of Thailand Pass registration probably in June, which will make it even more convenient or more easy for travelers to come to Thailand. And also the Firth phase, We Travel Together, campaign was approved in May to boost domestic tourism during the low season between June and September of this year. That will be another factor that will help tourism and our businesses in Thailand throughout the remainder of the year as well. Australia, starting from mid of April, we see Australia discard pre-travel RT-PCR testing and quarantine requirement for fully vaccinated traveler. And also travel bubble between Australia and New Zealand has been reinstated and resumed April of 2022. Sydney and Melbourne market have reported good recovery on the back of recovering corporate and MICE markets. And booking pace that we see in Australia across the region also accelerated in May and June as well. The Maldives, another big market for us. Like I said earlier, it has already surpassed pre-pandemic -- their performance already surpassed pre-pandemic level. This has happened at a faster pace compared with the rest of the world. And then we will continue to see sustained recovery throughout 2022 as the Maldives authority is launching new marketing activity to celebrate their 50 years tourism in the country. So we will continue to see Maldives RevPAR stay above 2019 pre-pandemic level. For our strategies for Minor Hotels, we would try to strengthen the brand for Minor Hotel. We grow brand awareness. We make a better engagement with our customers. We leverage on our GHA Discovery 2.0 loyalty program. NH will join this program in mid of this year -- by middle of this year, making GHA Discovery to be one of the 10 largest loyalty programs in the sector. And then we would probably be able to leverage collective power of the platform of 21 million members. We also adapt digital strategy to make it more -- we try to enhance customer experience by way of looking into what has changed in terms of customer behavior, and then we adapt our business model to respond to that changing trend. Like I said earlier, we have done for business transformation, digital transformation to better connect it with consumers at personalized level, with effective marketing tools, with Internet -- we upgrade our Internet booking engine. We also upgrade our application just to make sure that we communicate with consumer and travel as well. In terms of asset portfolio, we're trying to diversify our asset right portfolio. But as of now, we will probably focus more on asset-light strategy in terms of management contracts in the mid of the liquidity preservation period that we're in, even though recovery, it's become more visible, more and more but some uncertainty still there. So we have to be cautious in terms of CapEx spending and then asset rotation will still remain on the card. If we need to execute it, we would be ready to do so. But at this point, we see earnings recovery coming in, we feel probably more comfortable in terms of our balance sheet strength and also the need of doing more asset rotation probably not going to be as high as what we saw in the previous year. Moving on to Minor Food outlook for this year in some of the key markets. For Thailand, right now, our restaurant operate at regular hours. And then as you can see, some of the brand has been -- has gone through revitalization exercise, went sense, revitalization strategy leads to a much better performance of the brand. We would continue to reposition other key brands as well in terms of revitalize the brand to make it more relevant to the new generation of consumers. We also -- the Thailand hub will continue to drive digitalization for our own delivery application, our website order and our takeaway or pick-up channel as well. And we also will look into how to strengthen our data analytics to drive and forecast demand more accurately. Thailand hub is also -- will drive profitable new store growth by way of increasing trade zone penetration and also come up with some new store formats as well. And now we have loyalty program with 7.5 million customer in the system to be utilized to drive more sales and revenue going forward. For China, China probably was a soft spot in the first quarter. We -- our team in China immediately put mitigation plan amid the current lockdowns, which include labor cost reduction, rental reduction, negotiation with landlords as well as supply chain and cash flow management. And we would hope that this restriction and lockdown will be lifted probably at the end of this quarter or in June, so as the number of COVID cases are now -- is now declining. And every time we see the lockdown removed, we see a V-shape recovery, the sales and performance rebound immediately after lockdowns end, and we hope that this is going to be the case in the upcoming months. And we make ourselves ready in terms of operational excellence. We continue to have strong brand concepts and our proactive supply chain planning will ensure business continuity once lockdown ends. And also China hub plan technology -- to use the technology to improve their operations in terms of brand upgrading and supply chain management and payment system too. Moving on to Australia hubs. We would continue to drive the hub by focusing on service quality, partnership with delivery aggregators and with the new innovative store concepts, which include kiosk, drive-thru and grab & go. The store rationalization strategy that we implemented in Australia earlier result in lower number of nonperforming stores, and that helps store portfolio become more resilient and more profitable. And profitability will be lit up by improved top line. We now shift our focus back to a very basic coffee concept. We have a new marketing campaign, C is for Coffee, which focuses on coffee product to drive dine-in sales in Australia. And also, we are going to open our second Bonchon store in Australia, i.e., in Melbourne in Melbourne to following the first successful outlet that we opened earlier. So that's the outlook of Minor Food in key markets. In terms of our strategies, we continue to revitalize brands, as I said earlier. And also, we will digitalize customer experience. In terms of our -- the payment option that we offer to customer in terms of the several multiple channels that we reach out to customers via either brand apps or at the store, online, offline, and we would use database to do a predictive analysis to forecast changing consumer behavior and our business model to respond to such trend. In terms of delivery, we are one of the key restaurant chains that have our own delivery platform. We would try to differentiate 1112D to become a dominant or prominent player in the market, differentiate ourselves from the competitors. We also will launch delivery function in the brand app as well. We will continue to drive our growth through same-store sales as well as expansion of our outlets, especially in China, both equity and franchise store. And everywhere, we will continue to come up with a new innovative store format, not only just pure dine-in or it could be dine-in telco with seats or grab & go or piloted gas station or drive-thru. So any -- so all these formats will help us to achieve the higher reach to consumers in the upcoming quarters. So that's the key strategic priorities of all our business units. I'll pass here, and then we will start to get questions from investors at this point.

[Operator Instructions].

We started to have question already. We start off with the first question here asking about margins of Minor Food in China. If we excluding the QSR operations in China and also excluding the business restructuring of the contract manufacturing. What is the EBITDA margin and net margin of Minor Food, would be?

Like I said, the soft spot in this first quarter was China because of the lockdown. But elsewhere, Thailand is still doing really, really well. So it's compensated for such -- partially compensated for such shortfall. If we strip out our business in China from our performance, and if we strip out the effect of internal restructuring, by having manufacturing into under Minor Food, our margins will be better than what we reported. That's one. And then it's also on par with margin that we saw in the first quarter of the previous year. If you look at what we reported in the slide, on the core NPAT of Minor Food net NPAT margin coming down. That was because of China. If we strip China hub and if we strip effect of internal restructuring out, the margin will probably going to be on par with last year.

The second question is on balance sheet. What is how many is confident that the company can maintain the interest and debt to equity ratio of less than 1.75x in 2023 following the issuance of pending series for this year rate.

We will continue to do liquidity management plan. And we already see earning recovery on the horizon. So that will probably help strengthen our equity base. Also, we would also have warrants, proceeds of warrants coming in that will also help strengthen our equity as well. So with that, we will continue to maintain our debt to equity level below the debt covenant ratio.

The next question is on our debt profile. What is the proportion between fixed and float to some rate for the interest-bearing debt? And then what is the rate interest cost of debt?

At this point, fixed and float hover around 48% and 52%. 48% fixed and 52% float at this point. We will continue to maintain our 50%-50% policy. But when interest rate on the rising trend, we will try to increase fixed proportion higher than 50-50, maybe 60-40. But when interest rate on the declining trend, we're probably going to have higher float rather than higher fixed.

Adding to the answer on the average cost of debt in the first quarter is about 2.98%. The next question is on the food business outlook in the second quarter, especially in China. What is the overall business going to be like in the second quarter, given China has to remain under pressure from the lockdown?

Well, as I said earlier, every time the lockdown happen, and then when the government removed or end the lockdown, the business rebound very fast, immediately, we call it like V-shaped recovery in China every time we saw the lockdown happened in the past 2 years. So the strategy is we have to make ourselves ready in terms of ensuring supply chain continuity and then we continue to keep our strength -- the strength of our brand equity when the lockdown and people will come back to our store. So that's the strategy that we put in place. And then like I said, experience show that the government of China always have a handheld strategy to clamp down COVID situation really fast and removed the lockdown really fast. But for this particular wave, probably last a little longer than the previous wave. But we had some discussion with our team in China, and we hope that this lockdown might end from going to be lifted in the middle of the year in June. When that happens, we're ready to get our business back to normal.

Next question is on Minor Hotels. Can you please share the occupancy rate of Minor Hotels in Thailand, April and May since the 1st May saw Test & Go, go away plus the occupancy rate improved a lot in Thailand and also for the NH hotels.

In Thailand, occupancy climbed, it started with 28% in Jan, 29% in Feb, 37% in March and going higher than 40% in April and also in May, higher than 40%. So it's still below what we used to see in 2019 level, but it's getting there because we just saw the government relaxation of the Test & Go scheme in -- just this past March. And then in May, they abolished Test & Go scheme completely. And then Thailand Pass is expected to be abolished as well in June. If that happens, we will see a stronger momentum with higher occupancy in Thailand. In terms of ADR, we start -- we also saw strong ADR growth. We saw double-digit ADR growth every month in the first quarter, particularly in April, we saw about 24% increase in ADR year-on-year. So that momentum going to continue, especially when the country fully open.

Next question is on NH. The second quarter operating tax seems to be very strong for NH. Do you think that this can be sustained in the second half of this year because do you think that the pent-up demand is probably being serviced already? And if the pent-up demand will still continue in the second half of this year, which segment is going to drive NH RevPAR?

Well, I would think so. I would think it will continue in April for NH. Occupancy has continued to grow above 60% and the strategy to maximize ADR has resulted in a strong increase in ADR to higher than EUR 115, now it's at EUR 116 average per night, already achieving the same monthly like-for-like ADR of 2019 level at the group level. And then revenue in April have right now reached like EUR 140 million. And we see ADR upward trend continue in May as well. And it would -- once the country start to mobilize, now we -- NH cater more towards intra-European traveler and domestic travelers. That recovery happened faster than other segments. We will continue to see B2C, but B2B also start to recover as well since we see some of the -- as I've mentioned earlier, business traveler reactivation start to happen, and that will follow soon and help push demand for NH in the remainder of the year.

The additional question related on NH. What's the key reason for NH to be able to increase its ADR and surpassed the COVID level? Was it cost push or demand push or do we gain any market share?

Well, we implemented this ADR maximization strategy since last year. And given the strong brand that we have and also with the location in the gateway -- in the middle of the gateway cities, that also help us to implementing this ADR maximization strategy. So yes, I would say the premise location, brand that we have, the proactive marketing promotional campaign that -- all of that helped us to being able to implement solid pricing strategy.

Next question will be related for Minor overall. What is going to be the cost driver for Minor post-COVID if our banks continue to be controlled?

Like I said, at this point, we will continue to expand through organic growth, first of all, maximize the existing properties or restaurants that we have at the moment to drive sales for the existing platform that we already have. Also inorganic at the moment, will be done under asset-light strategy, i.e., hotel management contracts. And when our balance sheet is ready, we would continue to be opportunistic and see where we can expand further under asset right, which is comprised both asset heavy and asset light in the future when we feel comfortable with our balance sheet strength, which has improved over time.

Next question is on Minor Food on the price pressure. What do you think -- do you think, do you believe that Minor Food can be able to pass on the pricing rise to consumer, whether the demand will be impacted from the price rise?

Well, that was not the only strategy that we use. Price increases is not the only one, as I mentioned earlier, we try to mitigate the impact from rising costs by way of using proactive supply chain management, building stocks, doing long-term contracts using multiple suppliers to create competition and leads to higher bargaining power and then product, menu reengineering that also helped. And price increase is another strategy -- one of the strategy that will probably help safeguard our profitability and margins, too. But we will continue -- the situation still evolve and still fluid. We still monitor very closely in terms of the impact from inflation. And then we would react proactively accordingly.

I have a question -- additional question on this, whether what's the impact on operating margin of Minor Food?

Well, like I said, we try to safeguard our margins by way of using proactive supply chain and also the price increase that we do. And then drive top line. Once top line coming in, we probably have a better operating or higher operating leverage that will help us to protect operating margin to some degree too.

Next question is on Minor Hotels. What is the mix between leisure and business travelers?

Well, as I said, for NH, B2C segment is around 65% and B2B is about 35%. For certain location like Australia, maybe business travelers or corporate travelers, it's more than leisure. For Anantara brand in this part of the world, leisure is probably more than corporate, but we try to grow both segments more and more to make the right balance. But it's different from one location to another.

So what is MINT's current guidance? Does this still be recovery to pre-COVID level in the second half, like you already guided on the previous quarter?

Well, we try -- we would hope that we'll see operating stats on a monthly basis, getting to pre-COVID level, maybe in the second half of this year. But on a blended full year basis, this year, we're probably not going to be reaching pre-COVID 2019 level as yet. We probably have to take until like 2023 or 2024. But in terms of monthly point, monthly stats, we're probably going to get there. In some of the locations we already get there. But on the whole, we might get there in the second half of the year, especially our operation in Europe, which accounts for the bulk of our performance.

Next question is on Minor Food. Can you give an example of the innovative uplift which used to be a driver of the revenue growth?

Yes. Like Sizzler, we start to have a Grab & Go outlet instead of like full spacious dine-in. We also have drive-thru. We also have outlets in gas station. So that's what we're trying to come up with different brands, different outlet format and not necessarily that we would do like big dine-in format, but we would just, like I said, not only Grab & Go, maybe like delivery with a small number of seats, depends on the location. So that's what innovative about.

If there are more follow-up questions to cover, I'm actually more than happy to take in the time between the session. Thank you so much, and have a good day.

Please send your question to IR department, and we will address all of your questions later on. Thank you very much.