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

Good morning, and welcome to Minor International First Quarter 2022 (sic) [ 2023 ] Analyst Meeting. It's a pleasure of introducing our presentation, in which you will hear from Mr. Chaiyapat Paitoon, our Chief Financial Officer; and Ms. Namida Artispong, Group Investor Relations Director. [Operator Instructions] And now I would like to hand over to Khun Chaiyapat and Khun Namida for the presentation.

Good morning, everyone, and welcome to the analyst meeting to review our first quarter results. And also, we will talk about the outlook for the rest of the year as well. The agenda for today, we would start by recapping the first quarter results and business outlook. And also, we'll deep dive into each business units, starting with Minor Hotels, followed by Minor Food, and then we will talk about corporate information, other corporate information as well as emphasize or reiterate our business strategy in which the theme of this year is called Back to Growth strategy. So let me start with the major developments that happened in the first quarter of 2023 for Minor. We start with Minor Hotels first. We start to do -- we would -- we continue to do cross-brand selling strategy to introduce brand beyond our traditional markets, and also doing some brand upgrades, repositioning some hotels in order to get a higher ADR or higher room rates. Some examples that we did is we did rebrand some of the NH hotels. For example, each collections was rebranded into Anantara Convento di Amalfi Grand Hotel in Italy or another NH Collection was rebranded into Tivoli Doelen Amsterdam in the Netherlands. On Tivoli side, Tivoli was also rebranded to NH Marina Portimão Resort and NH Sintra Centro Hotel in Italy. And another NH hotel was rebranded to NH Collection Milano Touring in Italy, which was an upgraded in order to augment high ADR. We also opened a new NH Collection Dubai The Palm and NH Collection La Suite Hotel & Apartment in the UAE as well. So these are the examples of rebranding just to make our portfolio, enhance our portfolio value. And apart from this cross-selling strategy, Minor Hotels also opened another 3 hotels in Switzerland and Portugal in the first quarter of this year as well. So this will continue to gain more momentum as we speak and going into second quarter and the rest of the year as well. On Minor Food, we continue to do brand revitalization strategy. So we do a brand refresh program for the brands across the board. We also implement realizing that social media and influencers are now playing an important role in driving consumers' traffic and sales. So we implement brand ambassador strategy for some of the brands here, which we'll talk about it later in subsequent slides. And also, we will continue to come up with new product idea through product innovations to create excitement in the market and also to stay relevant in the competitive market landscape. On the corporate front, in this past quarter, we successfully raised THB 10.5 billion through subordinated perpetual debentures issuance, which further reduced our leverage ratio and provide more room for us to grow in the future. And also on NH side, Moody's upgraded NH Hotel Group's corporate rating from B3 to B2 and the probability of default rating from Caa1-PD to B2-PD. And the instrument rating of our EUR 400 million senior secured notes which due 2026 from B2 to B1 rating. We also announced cash dividend payment of THB 0.25 per share. We already -- we're going to pay this dividend this Thursday, and this dividend payment is due to favorable operating conditions across all business units. Let's move on to the first quarter year-on-year performance recap. We report core revenue of THB 32 billion in this first quarter, increasing 57% year-on-year, and this is due to strong demand from travelers all over the world and also increase in store traffic at the rest -- on the restaurant side. Also, our NPAT or net profit, improved dramatically from core loss of THB 3.6 billion in the first quarter of the prior year to a core loss of only THB 647 million this past quarter, beating and exceeding our budget and our expectation. And a strong impact was also a result of higher overall flow-through from revenue improvement and also our disciplined cost control as well as the decline in raw material costs as well. And if you look at the revenue contribution in the first quarter, Minor Hotels still account for the bulk, which is 74% of total; Minor Food, 24%; and Minor Lifestyle, only 2%. Moving on to our international presence or the split between our Thailand and overseas operation. As you all know, with the solid diversification strategies that we have been implementing over the past several years, now we have operations in 63 countries at the end of the first quarter across all business units that we have. And in the first quarter, revenue from Thailand account for about 27% and revenue from international account for 73%. Now that I mentioned about first quarter development, I would like to -- before we deep dive into a detail in each business units, I would like to talk about outlook of each business unit first. Let's start with Minor Hotels. For the rest of the year, we still see a positive trend, the increasing travel activities which combined with our brand strategies that I mentioned earlier, to drive cross-brand expansion. And then the outlook for hotel -- travel mobility is still going on quite strong on the back of not only leisure demand, but on top of that, there are some like business-related travel demand coming in as well. Operating trend across regions for upcoming quarters was quite strong. If you look at Europe occupancy, we're coming out of a low season from first quarter into second quarter will start of the low season. Occupancy has reached 70% in April, with ADR stood at EUR 147 per night, resulting in RevPAR in April still surpassing pre-COVID level by 32%. And occupancy in full year of 2023, we expect to increase and reach the same level as those of 2019 from the resurgence of larger-scale business events and congresses on top of the leisure demand that I mentioned earlier. And Southern Europe will continue to deliver healthy operating trends, while demand in Central Europe will continue to improve, and we still see a strong on-the-book forward reservations and forward booking for our high seasonality in the second quarter of the year. So it looks strong and looks like it's going to beat our original budget that we submitted to the Board late last year. Thailand and Asia, we still see gradual return of travels, occupancy trending up over time. And now we start to see the restoration of flights and air traffic. Gradual return of flight service has resulted in the improvement in our booking on the book. And pace of growth still accelerate. I think we'll continue to accelerate in the second half of the year, especially from the Chinese travelers will start to come in more and more. On Australia, business -- for our business in Australia, we had a record year last year in 2022. And now the hotel in Australia continue to benefit from both domestic travels and also international tourist arrival started to pick up quite noticeably this year as well. Moving on to Minor Food outlook for this year. Restaurant business still gain momentum, and we start to see a strong recovery of our China hub, which used to be a little bit of a drag last year because the COVID lockdown that China had longer than others. So we -- now that removal of restrictions, we start to see that such a strong recovery, and that will help performance of Minor Food overall substantially. But for other hubs like Thailand, we continue to do a brand revitalization program for most of the brands in our portfolio, including Swensen's, Sizzler, Bonchon, revenue during the recent Songkran holiday season broke a record high for us and also above pre-COVID level as well. The focus will continue to be brand refresh for the changing -- in the midst of changing consumer landscape, and we want to grow more market share. The TPC or The Pizza Company, we rolled out new store designs with additional outlets in Bangkok and nearby locations. For Burger King and Coffee Club, business will continue to be boosted and improved dramatically on the back of the return of international tourist arrivals or tourism industry, better outlook. China, as I mentioned earlier, we start to see recovery of domestic consumption, and we introduced new menu as part of the upgrade exercise. On the back -- on the other side, supply chain management will continue to be driven to ensure we have high-quality dish or quality raw material like fish and also the price of raw material like fish has come down year-on-year as well. For Australia, we focus on growing profitability sales through promotional and marketing campaign at the national level to highlight brand awareness for Coffee Club in Australia to improve dine-in experience and also, we highlight our product quality as well. The other thing from -- that I want to highlight in Australia is our coffee roasting house. Nomad has increased its roasting -- coffee roasting capacity with a new facility operational at the beginning of this year to capture stronger demand that take place after COVID. So I'll hand over the floor to Namida, our Head of Investor Relations, just to deep dive into each business units, stats in detail. To you, Namida.

Thank you. First, our first business unit is Minor Hotels. The revenue on Minor Hotels reported revenue growth of 76% year-on-year to about THB 24 billion, and this was driven by all business models and also all geographies as well, including owned and leased, management letting rights, managed hotels and also mixed-use business. And also in all geographies, we have mentioned Thailand, Europe, Australia and New Zealand, Maldives and the Middle East and also the Americas. For EBITDA, EBITDA of Minor Hotels increased at a higher rate than revenue because of the higher flow-through. And for at the bottom line, Minor Hotels reported a core loss of about THB 1.2 billion, but this was still to anticipated and budgeted lowest travel seasonality of the European hotel business. But having said that, this was a significant improvement from a core loss of THB 3.7 billion in the first quarter of last year. Drilling down into each business model. First is owned and leased hotels. In terms of number of rooms, number of rooms was flat year-on-year in the first quarter of 2023, but increased slightly by 3% when compared to the same quarter of 2019. In terms of RevPAR, RevPAR in the first quarter nearly doubled year-on-year because of the increase in demand and also average room rate of hotels in Thailand, Europe and Latin America and also Australia. If we compare the performance versus 2019 level, RevPAR in the first quarter outperformed pre-pandemic level by 12% because of the successful pricing strategy of ours. Looking in the month of April, RevPAR continued to be very strong and positive. RevPAR increased 43% year-on-year and exceeding 2019 level by 35%. Looking into more details in each geography. The first one is Europe and Latin America. RevPAR in Europe -- of hotels in Europe and Latin America surged by 85%. And this was from higher average occupancy rate and also average room rates as well because of the strong travel demand of both leisure and corporate segments. And again, comparing to 2019 level, RevPAR also beyond 2019 level by 12%, and mainly due to the increase in room rate. If we compare this over pre-pandemic level, Italy posted the strong guest RevPAR improvement and then followed by Latin America, Spain and Benelux, respectively. Looking in the month of April. RevPAR positive momentum continue to be very, very strong in April for hotels in Europe and Latin America. So RevPAR increased 37% year-on-year and outperformed 2019 level by 32%. On a positive note, occupancy rate reached 70% already in the month of April, and this was only 2 percentage points below 2019 of 72%. And in terms of ADR, ADR reached EUR 147 per room per night, which beating both year-on-year and then 2019 level by more than 20% to 30%. Next region is Thailand. Thailand RevPAR in the quarter more than tripled year-on-year because of the increase in average room rate, and also the demand as a result of rising number of international travelers visiting the country. And comparing to 2019, RevPAR was -- RevPAR reached the 2019 level for the second consecutive quarter already because of the room rate acceleration. Operational stats remain very strong despite entering lower seasonality in the second quarter compared to the first quarter. The RevPAR in April doubled year-on-year and also up for 2019 level already by 8% in the month of April. Occupancy rate in the month of April reached 69% and ADR continue to climb up very strongly. And we expect that good operations will continue and should accelerate further in the second half of the year when Chinese and other feeder might get started to travel more actively. Next market is the Maldives. RevPAR of our hotels in the Maldives remain above pre-COVID level for the seventh consecutive quarter, outperforming by about 6%. And then this was due to higher average room rate from our sales efforts. In the month of April, we saw a slight decrease in terms of RevPAR, about 6% year-on-year and then compared to 2019 level. And this was solely because of the increased competition from other reopened destinations. However, we continue to do our sales and marketing strategies to make sure that we maximize our RevPAR going forward. And as expecting Chinese to come over in the second quarter, second half of the year, we should expect RevPAR to regain on positive momentum for the rest of the year. Next destination is our hotels in Australia and New Zealand. RevPAR of hotels in Australia and New Zealand continue to be very strong in the first quarter, growing by 24% year-on-year and also beating 2019 level by nearly 30%. And this was attributable to higher average occupancy and also room rates as well because of the higher number of leisure and business travelers, especially in the city locations. Looking in the month of April, RevPAR year-on-year slightly decreased by 8%, but this was because of the high base occupancy reached last year. However, the occupancy remained very high at 77% in the month of April. And we believe that hotels in Australia will continue to benefit from driving domestic travel industry and also the international tourist arrivals that have started to pick up this year. And when comparing to 2019 level of RevPAR of hotels in Australia and New Zealand continue to beat and outperform pre-pandemic level by 37% in the month of April. For hotels in the business model of management contract, RevPAR increased about 30% year-on-year and beat 2019 level by 2% with the improving trend of hotels across all regions. And the trend in April was similar trends as in the first quarter, RevPAR increased 28% year-on-year and above 2019 level by low single digit. In terms of hotel expansion pipeline, the numbers haven't changed that much compared to previous quarter. We are going to expand under both asset-heavy and also asset-light business models. So in terms of owned and leased hotels, we are opening up 7 hotels with more than 1,000 rooms, whether it's in Indonesia, Maldives, in Europe and also in Australia as well. And under management contract, we are going to open more. We are going to open 64 hotels with more than 12,000 rooms of key hotels in all geographies that we have presence in, whether it's in Asia, Oceania, Europe, Latin America. But you would see that we are going to ramp up more in China and also in the Middle East because we have local partners with Funyard with China in 2021. And recently, we also signed partnership with Tourism Development Fund of Saudi Arabia. So we are -- you would see more hotels coming online because in partnership, we are developing hotels over the coming years across multiple brands, including Anantara, AVANI, Tivoli and also Oaks as well. Moving into the mixed-use business. Revenue from mixed-use business more than doubled year-on-year in the first quarter of 2023, and we have seen positive revenue growth across all business units [indiscernible]. The first one is [Technical Difficulty] positive revenue growth because of higher number of members [Technical Difficulty]. During the quarter, we also have some real estate sales activities, particularly in Phuket, Thailand and in the meantime [Technical Difficulty] restaurant in the U.K. and also [Technical Difficulty] business is also still increasing [indiscernible] traffic overall. Moving to Minor Food business unit. Core revenue surged about 21% year-on-year, and this was from a turnaround of China, good operations in Thailand and also full operation of restaurant business at Thai airports as well. Looking at the operational stats in the right column. We saw total system sales growth of 20%, and we saw all hubs reported positive total system sales growth as well coming from higher traffic with same-store sales growth of 11% and then coupled with outlet expansion of 5% and also the reopening of temporary closed stores last year as well. In the meantime, EBITDA and net profit, again, grew at a much faster pace than revenue. EBITDA grew at 45% while net profit more than quadrupled year-on-year because of the higher revenue flow-through, improved cost management and also lower raw material prices and together with our effective price optimization strategy as well. Moving into each hub. The first one is Thailand. Thailand, during first quarter, especially Songkran this year, we recorded the highest revenue in the history. So in the first quarter, we saw same-store sales growth of about 6% year-on-year. And because of the reopening of some stores that were temporarily closed last year and because of the outlet expansion as well. Total system sales grew about 20% year-on-year in the first quarter. Sorry, I think I was on mute. So recap, we have done several strategies in the first quarter, but we want to highlight in terms of The Pizza Company. We have done brand revitalization program across many brands, and it was time for The Pizza Company at the beginning of this year. So our aim to doing the brand refresh was to attract younger generations of customers and also enhance customer dining experience as well. So we have done it through new store designs, new local and also a variety of innovative menus as well. And going forward, we are going to roll out our new store design and new logo more into other outlets, especially in Bangkok and also in metropolitan areas. Swensen's, after the brand revitalization program a couple of years ago, the momentum has continued to be very strong and Swensen's continue to launch new product innovation from time to time. And then in the first quarter, again, we -- again, we launched our fried chicken ice cream, which became talk of the town, strengthened brand awareness even more for the brand Swensen's. And for Bonchon, Bonchon, the first time ever of its brand used the first brand ambassador strategy to increase brand awareness, and we want to expand our customer base, especially to younger generations. Moving on to China hub. China hub, as you can see, because of the lifting of local lockdowns and social restrictions since December of last year. Same-store sales growth and total system sales growth turned positive in the quarter, increasing 15% and about 20% respectively in the first quarter. And because of its opportunity to adapt to local operating environment, that's why you can see that we were able to see the sharp demand recovery immediately following the country reopening. And on a very positive notice that in the first quarter, the sales per square meter increased, outperforming 2019 level, the pre-pandemic level by 34%. And looking the stats in April, the strong positive momentum continue in the month of April because of the rising domestic consumption and because of the rising social gathering events as well. So you would see that same-store sales surged by 40%. And because of the reopening of the closed stores of last year, total system sales increased by more than 100% year-on-year. Moving next to Australia hub. Despite the lower number of outlets, same-store sales growth and total system sales growth grew 24% and 17% year-on-year. And in the first quarter on the Coffee Club, focus on enhancing brand equity, launching new products and also increasing active loyal customers. And as like many, like other key hubs like in Thailand and China, in the month of April, we saw positive same-store sales growth of Australia hub of about 11% and total system sales growth of about 4% as well. On top of the 3 key hubs that we have mentioned, Minor Food also have operations in other markets as well, including CLMV, Indian Oceans and Singapore. But we want to mention about Singapore market to you because we think that it has a very strong equity brand and Singapore market has such a high potential to grow further in the future. So looking at our restaurant business in Singapore. Right now, Minor Food have about nearly 80 outlets in Singapore and with about 21 strong brands. If you look at our brand profile in Singapore, about 75% are under Asian cuisine and then 25% are under Western cuisine. The core brands that we have in Singapore included Thai Express; Sanook Kitchen, which is Thai food as well; Riverside Grilled Fish that we bring -- brought over from China; Go-Ang Chicken Rice; Poulet; Josh's Grill, Mamma Mia; and also the Xin Wang Hong Kong Café. And then also, we develop new equity brands in Singapore as well, whether it's Siam Smith, the Thai Boat Noodle and VietSmith, the Vietnamese cuisine. So these homegrown food concepts that we have, have such a strong and established brand presence in Singapore already, and we see potential that these brands can expand to other countries even more, for example, like in Vietnam, in Malaysia, and then we would do so for the international expansion through a franchise model. In the first quarter on a positive note, the Singapore hub recorded stronger revenue and also higher profitability as well, driven by higher store traffic, increasing the number of outlets and also consistent cost management. This is for each business unit, and then I would like to hand over for corporate information to Khun Chaiyapat, our CFO.

Thank you, Namida. Let me go through some of the corporate information, including our capital expenditure plan and balance sheet strength. Well, as you all know, we start to see earnings recovery and we start to see our leverage ratio coming off to the level below our internal policy or our manageable level. So the fact that we slashed our CapEx dramatically during COVID just to preserve liquidity during the year 2021 and '22. Now we believe that we should get back to expand. So our CapEx will be ramped up to about THB 10 billion to THB 13 billion in the next 3 years, as per our 3-year plan. And the source of fund to finance this CapEx will come from operating cash flow. As I said, earnings recovery become firmer and stronger. We also proceed from warrants, whereby the warrant 8 has been almost fully exercised and we received the proceeds in the second quarter as well as warrant 7 that coming on stream as well together with debt financing that we're going to use to finance this capital expenditure plan. And like I said, leverage ratio using net interest-bearing debt to equity which is the covenant ratio, has come down to about 0.94x at the end of this first quarter, well below 1.75 covenant ratio and also well below our internal policy level of 1.3. And at the end of March 2022, we hold cash of about THB 23 billion. In addition to that, we have unutilized credit facility of more than THB 30 billion as well. So that CapEx and balance sheet strength for this quarter. Moving on to our debt profile. If you look at our diversified debt profile, we have been implementing the fixed float split strategies in the midst of rising rate environment, whereby we're increasing the portion of our fixed-rate debt. We also prepay or repay some of the debts that we have, especially the expensive floating-rate debt. In a few currencies together, we're implementing the hedging strategies to respond to the high interest rate environment. If you look at the euro debt that we have. Now we have 59% fixed, 41% float. On NH side, they have already repaid all the ICO loans would carry high interest rates. And also, we -- NH will continue to utilize internal cash to repay the floating rate by left loans in upcoming July this year as well, up another EUR 50 million. For Thai baht, we have 58% fixed, 42% float. We think higher fixed-rate portion compared to previous -- we have higher fixed-rate portion compared with previous quarter because we issue this perpetual bonds in February. U.S. dollars, where by rates going higher and faster than other currencies, we lock in 96% fixed and only 4% float. We have also made early repayment of U.S. dollar syndicated loans early this year of USD 200 million. On Australia, currency debt. We just finished our refinance exercise of our syndication loans. We are in the process of implementing hedging strategies on that loan. We now increase fixed-rate portion, from 14% to 27% just this past April as a result of interest rate swap transaction, and we're looking to do more when the market window become more inducive and allow us to do more in upcoming months. So we think that we are already implement proactive strategies to react on interest rates environment. And as I mentioned to you in previous quarter, on the back of this proactive implementation of debt management, coupled with ADR increase and cost-cutting program elsewhere, we will continue to maintain our margin and profitability throughout the rest of the year. I think lastly, we will touch on the 3-year strategy, which I already mentioned to you in the previous quarter already. But I just want to reiterate the strategies that we have, we continue to look for core revenue growth of no less than 12% to 15% on a CAGR basis over the next 3 years as per our 5-year plan that endorsed and approved by the Board late last year. We want to see our core return on invested capital no less than 10% over the next 3 years. And nonfinancial goals that we have, we want to be employer of choice. I believe that we have strengthened our employee branding in a big way, and we just got certified as a Great Place to Work at Minor International by one of the reputable third-party organization as well. And we also continue to maintain and strengthen our sustainability strategy, and then we continue to have ESG strategy at heart and crafted alongside our business strategies in all occasions. So the 6 growth pillars that we have as per high-level strategy, first one is winning brand portfolio. We will continue to drive our multiple brand portfolio across the region and across the globe. We continue to improve value enhancement and productivity gain through either back-office transformation investment that maximize our return and shorten payback period, the way that we try to improve our profitability and margins and also productivity that we try to do through enhancement of revenue per employee or profit per employee. We also look into investment and partnerships with the strong partner and operators as our third strategy pillars in terms of investment or M&A or hotel management franchise, we try to look for strong partners to grow together with us and maximize return to our shareholders. Fourth strategic pillar is digital and innovation. Will always come up with new ideas. We have transformed our organization digitally and innovatively in a big way, especially during COVID, has accelerated our transformation process. So on Minor Hotels' side, we'll use multi-brand booking engine. We will leverage on the data, a lot of data that we have on travelers and consumers to do data analytics and predictive analysis to satisfy and anticipate their needs and fulfill their needs and drive our revenue in the future. And we try to connect more with consumer and traveler in a more personalized manner to digital touch point strategy of ours as well. On Minor Food, similar to Minor Hotels that I just mentioned. But on top of that, we still -- we also have a proactive supply chain and logistic planning. We do product innovation and create excitement to the market every month from various brands that we have. And customer connection and engagement is also key, similar to Minor Hotels' strategy. On people development, like I said, we certify as great place to work. We elevate all the brands -- consumer brands that we have, have helped elevate our employer branding and attract talent to come back to our sector. People who used to flee to other sectors during COVID start to see the recovery of our earnings and see the brands getting stronger and stronger, and they eventually come back to our sector, and that -- not only that we're going to attract new talent, but the existing team members that we have here we continue to improve them through leadership development program and agile adaptability exercise or training that we have for all the team members. Lastly, sustainability strategy is always at heart for Minor. Five key strategic pillars for sustainability of ours: Evolve around people; value chain; environment and planet, environment total conservation; governance -- corporate governance; and also shared value or install ESD mindset to all the team members here at Minor and also for all the stakeholders around us, including community at large as well. So those are the key like 6 strategic pillars at a high level to drive our growth going forward. And the last slide that I have here is just our aspiration to be in the next 3 years. We want to have more than 600 -- or up to 1,000 hotels in the next 3 years and more than 220 residential units and 320 or more vacation club units, and more than 3,400 restaurants across the globe as well as more than 220 retail shops across Minor Lifestyle unit. So this is just aspiration, I think, based on conservative pipeline, but we still stay opportunistic in nature. So we aim -- we might aim higher going forward to achieve a much higher goal in the next 3 years and that will help drive our top line, bottom line and maximize shareholder value at the end. So I will end my -- our presentation here, and I'll open the floor for questions for Q&A. You can type your question to us or you can raise your hands and ask the question online.

There is no question in the chat box yet. If you have -- I think, someone raised their hands. [indiscernible] from Goldman Sachs.

Right. I have two questions. Maybe I'll go one by one. First is on hotel EBITDA margin, yes, it has been quite volatile and also weaker in first quarter. Pre-COVID, it doesn't seem like a good gauge, given change in accounting policy and cost savings. So can you guide us through how should we think about EBITDA margin for this year? And also, are there room for further improvement across the next 2 years?

Well, I think we will try to get our EBITDA margins back to our pre-COVID level as much as we can. But I think this year, with the inflationary pressure and rising rate environment. It's probably going to be a little bit of a challenge for us to get there. But as I'll say, in the year 2024, we might be able to achieve that target. But anyhow, we will try to see the rest of the year, especially in the second half of the year, we'll get there or not. But it looks like from our budget, we would get to pre-COVID level at EBITDA margin like-for-like pre-TFRS basis to '19 level in 2024, just to be conservative.

On a post-PFRS basis, how did the pre-COVID level EBITDA margin look like?

Pre-COVID level, we only measure it on a pre-TFRS basis. So that's why I -- when we look and we do the budget, we have post-TFRS and pre-TFRS since 2000 -- after COVID period. But pre-COVID, we only have one measure on a pre-TFRS basis. That's why we have to compare like-for-like with -- on a pre-TFRS.

Okay. Got it. Moving on to my second question on ADR. Are you seeing signs of slowdown in any of the geography that you're operating in, in terms of ADR specifically? And can you comment on Europe ADR as well?

Yes. Well, if you look at Europe ADR, you see on our presentation, right? In the first quarter, ADR increased by 27% year-on-year. And compared with first quarter 2019, it still increased 23% compared with '19. And if you look at April, ADR still increased by 24% versus last year. And if you compare with 2019 April, it's still higher by 37% year-on-year in April. So the trend is still looking strong, and that's what drives RevPAR higher than pre-corporate level. I'll give you an example. In addition to what we indicated in our slides, which is first quarter. In April, RevPAR of Europe higher than 2019 level by 32%. So it's still going quite strong. Elsewhere, in Thailand, if you look at it's higher than 2019 level in the first quarter by 14%. In the April, for example, it's higher than 2019 level by 24%. So the momentum still getting stronger and stronger as well as RevPAR for Thailand. RevPAR for Thailand, if you look at first quarter, it's flat compared with 2019 first quarter. But if you look at the April, RevPAR has already surpassed 2019 level by 8%. So momentum is still going quite strong.

Got it. And just one last question on your balance sheet, given that it's much stronger than before. Are you, at this point, thinking about more opportunistic M&A?

Yes. We will look out and then as we acquisitive in the past before COVID, a lot of deals coming to -- in our way as soon as the banks know that we're back on track and back to growth mode and our earning recovery getting firmer. They come in to present more deals to us, but we have to be cautious and look only for deals that will offer us with good return or fit with our investment criteria and ratio in terms of not only financial return, but operational fit and strategic fit. So we -- to answer your question, we'll stay opportunistic, and we will look at something that meet our investment criteria and return and will maximize shareholder value. At the same time, we still can keep our leverage ratio at bay. For example, in the past, if you look at whenever we acquire anything, we make sure that acquisition target would generate revenue and earnings to be able to contain our leverage ratio at internal policy level or make it come down to below internal policy level in a matter of less than a year or 1.5 years, which we have successfully done so for the past transaction before COVID with the exception of COVID period, which is exceptional situation. But at the end, we were there through COVID, and we managed to bring down leverage ratio now be much below internal policy level.

And where do you see the opportunity?

Opportunity, well, I think we will focus on where we have economy of scale and cluster of platform that we already had. So I'll say the focus will be where MINT has key economy of scale hubs or the cluster that we already had, and then we can leverage on that to improve efficiency, operational efficiency or even cost efficiency when we consider our M&A. But we don't rule out any other profitability if it maximizes return overall though, but just to give you color on how we're going to take advantage of our existing hubs and platform that we already have.

We have more questions at the chat box and also raising hands. [indiscernible] from UBS.

I have two questions from the hotel side first. So just a follow-up on the ADR question. Is the ADR that we see in Europe in April, the EUR 145 is around, is that sustainable throughout Q2 and Q3? And if so, what will be driving that? That's the first question.

I think it's still -- I think we still see strong ADR coming in. And the magnitude of ADR increase probably not going to be as substantial as we saw last year because last year, we came in from a low base. But this year, even though we will continue to see ADR increase, magnitude probably not going to be as substantial. But still, this year, RevPAR will be driven not only by ADR, but also by occupancy as well. So we will continue to see RevPAR increase if not substantially by the ADR, but occupancy will help as well as we're still optimistic on our ability to maintain ADR or increase ADR looking at on the book -- forward booking with leisure demand still coming in strongly, revenge travel to stay even though a lot of people have said it's going to die down, but it's still not really died down yet as well as business-related travel that's coming in on top of big corporates, big groups, MICE, trade fairs, congress-related travel and also the long-haul flights that has been restored as opposed to all the short-haul flight that we saw last year. So the rest of this 2023, we're still optimistic about ADR. Whether it will sustain to the next year, a year after, that's another question, but we'd not stay still. We try to look out for growth elsewhere, alternative growth plan that we have, like I said, cross-brand expansion strategy, more hotels in the pipeline as well as repositioning program or exercise that we will do to our existing hotels to make it enhance the customer proposition in order to command higher room rates. So that's other growth plans that we prepare just to be conservative and ready if ADR happened to -- has not too much power to go up any further in upcoming years. But still, we still see ADR potential -- very strong ADR potential for the rest of this year.

Just one clarification on that answer. Are the big corporate event that we are talking about that's happening this year, are those booked within our books now? Or is it just a planned corporate congresses that is there?

We see big names booked through our system now. We are starting to see that flows.

So my second question is taking a bit of a step back and the bigger picture. So what has been the main difference between the recovery pattern of Europe versus Thailand. Your European operation seems to be growing well since last year and even better this year. But Thailand still seems to be lacking a bit. Is it a matter of competition? Is it the consumer behavior or what seems to be the key difference in separate the recovery of the two regions?

Well, I think first is that Europe opened before everyone else. They opened even in 2021, way ahead of Thailand. And Thailand just abolished all the protocol in July or August of last year. So it gives us -- you have to give some lead time for Thailand to catch up. Also, in Europe, our operations cater -- start to cater more towards domestic and intra-European travelers. That's when mobility happened first in Europe. That's why we see recovery ahead of everyone else, like Thailand here. Thailand then on international travels and also hint on flights and air traffic, which we see trending up day-by-day now, but it didn't go as fast as what happened in Europe. So I would say I think that's the main difference. And now we -- I think the government, airlines and also airports, trying to accelerate their reskill, upskill program of their staff to accommodate and help with the quick demand recovery as much as they can from my last discussion with the government and the relevant authority. I think if that has been unlocked in a meaningful way, we'll see more and more tourist arrivals coming to our country. Well, if you look at the trend, the trend is showing positive trend, especially during the high season first quarter and some grand period.

Sure. So the follow-up to that is, basically, do you think that your Thailand operations could mimic the recovery pattern of your European operations, like multiyear ADR growth, occupancy going back up and even potentially higher than pre-COVID level? Is that a thing we can expect from your Thai operation?

Possible because if you look at ADR, it's still going higher than pre-COVID level by double digit, right, especially in April that we see, it's up to like 45% higher than pre-COVID level. So for the rest of the year, even though second and third quarter will be soft season, but fourth quarter will be strong season, high season for us. And coupled with the demand from Chinese travelers, which will come in more strongly in, I'll say, in the second half of the year, that will help our ability to command good room rates. Chinese -- even though we started to see Chinese flows in -- before everyone else because we cater more towards upscale and luxury segments. But the time that Chinese travelers need to renew their passport, we knew that the travel protocol, they have to visit their family and their hometown within their own country first. That will take a little bit of time. But when that has been done, that we will start to see more Chinese inflows possibly towards the end of the second quarter than the rest of the year.

And my last question is on the Food side. Basically, what is the expectations of the full EBITDA margins going forward given that China is looking to recover, but also Thailand could be facing minimum wage increase? Have you guys done any sensitivity or any work on that front?

Yes, we -- like I said in our previous quarter, we have doing proactive supply chain management when inflation happens, when raw material price start to increase, we start locking in rates with our suppliers and we have -- we started to stock up some of the expensive raw materials on our side that alleviate the rising pressure from inflation on our cost and for our margin as well. So that together with the price optimal strategy which we increased prices of some of our menus. Together, we reshuffle our main news through what we call menu reengineering strategy that helps us to provide a buffer for any cost push that happened now this year. And if you look at EBITDA margin like-for-like, I would say we aim even to match 2019 EBITDA margin even this year as per our 5-year -- 3-year plan or budget, aspiration and we'll exceed 2019 EBITDA margin in 2024 as well.

Let me add a little bit more color on the ADR of hotels in Europe. So for 11 days in May, actually continue to increase from April. So April ADR was about EUR 147 per night. And for the 11 days of May, it has gone over like EUR 153 per overnight. Just to add some color for you. Next, [indiscernible] [ Barnat ].

Mr. Barnat we see you raised your hand please. Ask you question online?

Otherwise, we can skip to [indiscernible], and then we can go back to Mr. Barnat later on. While we are waiting for them, who raised their hands, we probably can go to the questions from our group chat. The first one is about our good news about increasing stakes in NH hotels. What percentage of stakes that we will be increasing and then how many CapEx that we will be investing?

Well, we -- like we -- if you look at the -- what we announced to the market, we own 94% of NH and we intend to purchase additional shares, the rest of -- the remaining 6% in the market for 30 days. So our aspirations is to get as much as we can from the market. But at this point, we don't know. We're still waiting for the results of our acquisition of shares in market.

Okay. Now [indiscernible] Barnat first, please?

Yes. Okay. Can you hear me?

Yes. Yes, we can hear you.

Okay. There's a lot of discussion in your slides about revenue, but not so much on costs. And as I understand it, there is a significant shortage of labor in the hotel business and in the fast food business, and that's really what's constraining your unit growth. And as a result of that constraint, you've raised prices, which makes a lot of sense to get you better margins, but now we're expecting a big surge of Chinese tourists, hopefully, in the next few months. So if you're already at your sort of limit in terms of personnel, how can you expand to take advantage of the expected surge of tourists? And also, are you having that problem in Europe?

Well, to answer your question, we saw that shortage of labor as a challenge even today, right? But the magnitude of such problem has been diminished over the past several months. We saw that as a big challenge last year, like when we start to see business volume activities coming in quite strongly. And that during COVID, a lot of people flee from our sector to other sectors because of the loss that we made and salary reduction sacrifice that a lot of our people in our sectors has to do. So that cost to flee and the lack of or shortage of labor. But when we start to report our earnings recovery in the third quarter or even in the late second quarter, people start to see that we start to resume our business and start to report profit gain. That helps some of them to come back to our sector. Alongside for our company in particular, we have a lot of consumer brands, multiple consumer brands in our portfolio. Food brand, hotel brands, which resonate well with the public with the potential employees in the market as opposed to other industry, which is not consumer, which doesn't have consumer brands in their portfolio. That stronger consumer brands that we have in which we always emphasize this brand equity strengthening is key all along has helped differentiate us and elevate employer branding and help us attract key talent back to our industry. So I'm not saying that we have already abolished that problem, but that problem has become -- has getting better and better as we speak when people coming back on the back of recovery of our performance, our employer branding, which is getting stronger as well as the [indiscernible] that takes a little bit of time to do. If you look at last year, we had good labor. We got some complaints so did everybody else in the industry get complained from travelers that they didn't get like as good service as before, but that complaint has come down and almost becomes very minimal today because the [indiscernible] process has been ongoing for almost a year now. And now we have to get to the point where we have a better condition in terms of labor. But having said that, the shortage of labor, the cost of labor or other costs that has increased, as I mentioned during my presentation, the ADR maximization strategy of price optimization strategy that we do on both Hotel side and Restaurant side, it's enough to cushion and provides a buffer for us to see -- to safeguard our margin on profitability to a certain degree. And we still believe that the budget -- the margin that we aim as for our budget that we submit to the Board last year is still intact with this strategy.

Where do you stand in terms of labor cost? You said that you had cut salaries for a lot of workers during the COVID and have price per labor gone back up to pre-COVID levels? Is it higher or lower? What's happening with that?

I think we have done salary reduction of existing management and some of the team members. And also, we cut down the number of people that we use during COVID. You have to see before COVID, we employ like more than 80,000 people. And at one point, during COVID, we reduced it down to 60-ish -- 60,000-ish number of people. And the flexibility -- we have flexibility to do so because we have been employing part-time employee in the past, even pre-COVID level, and that provides us with flexibility to manage demanding power. But right now, we hired back more people, but the people that has been around or hiring back, we have to make sure that they have more productivity gain than before. So revenue or profit per head have to be -- has already improved. So the cost net-net will not going to be as high as pre-COVID. One of the KPI or key metrics that we measure our people productivity is we want to see productivity gain higher than the EBITDA improvement for that particular year.

Okay. And the last question on terms of costs, you said that you're able to raise prices to offset the higher prices for your raw materials. Do you think that situation will continue?

No. That's not the only strategy that we do. We do implement a combination of strategy price optimization is one thing. But like I said, we also do cost control. We also use long-term contract with suppliers to lock in like a hedging strategy, to lock in raw material price. We also use a launch tender process to bring in multiple suppliers to compete among each other. So that's why we can contain costs in a more efficient manner. Also, the economy of scale that we have allow us to negotiate more with suppliers or trade partners much better. And also on the Food side, in reengineering is one of the key strategy that helped to use control costs and protect margin as well.

I don't think you got to the part of my question about the labor availability situation in Europe.

Well, we -- like I said, we have some challenges. I told you we had some challenges in the past, but the challenge has been alleviated through the recovery of our performance and also through the employer branding that has been strengthened through our brand equity strengthening strategies. So to answer your question, are we still facing shortage of labor or good labor or SKU labor. Yes, we are. But that problem has been addressed and diminish over the past few months, and we will continue to address that problem going forward. Am I answering your question?

[indiscernible], Please go ahead.

Regarding the margins, I understand you kind of addressed the EBITDA margin question already. But in terms of the core net margin in the first quarter, even though EBITDA margin is already above pre-COVID, the core net margin is still significantly below. I understand that there's a seasonality effect that may have distorted the trend for just 1 quarter. But if we look at the whole year this year in 2023, what can we expect the core net margin to rebound to? I mean, should -- given that the room rates have been increasing is now much higher than 2019, can we also expect that the core net margin should also end the year at a level higher than in 2019 as well?

It's going to be a challenge, to be honest. With -- like I said, room rate maximization strategy, price optimization strategies and other strategies. This is just to provide cushion and buffer to respond to a high-cost environment that we're in, which is in contrast to the cost environment that we saw back in 2019. You're probably well aware, cost environment now and '19, totally different. In terms of inflation, in terms of utility, in terms of overhead, in terms of interest rate environment is different. But the fact that we have implemented various strategies to safeguard our margin as much as possible. So I'll say, if not higher than '19 level in terms of net margin, but it will be close. But I'll say, just to be conservative, we will probably get to '19 level net margin in 2024, just to be conservative. But you never know. The second quarter, if things turn around more, more Chinese travelers and our ability to commend more -- higher ADR than the budget for we could get there faster. But at this point, just to be conservative because of the cost environment that we're in, above EBITDA line and below EBITDA line in terms of cost, it's quite a challenge to get back to '19 level net margin. Am I answering your question?

Yes. Just another question regarding the debt that you have, given that this year, operation is improving. Cash flow is also going to be trending higher and you should have excess cash. How much debt are you planning on paying down in 2023?

Well, we have cash and this cash going to pay some of the maturing loans -- maturities and bond maturities as well as the -- to repay down some prepayment down some of the expensive debt, as I said. But at the same time, we have to reserve this cash for our expansion, for our CapEx, for our growth and maybe both organic growth and inorganic growth. But -- so just -- and also, we have to reserve some cash in the middle of the -- some of the uncertainties that people are still concerned about. So this cash will not only for pay down debts. We -- definitely, we're going to pay down more debt, but also we set aside to -- for our expansion plan and also for -- to preserve some liquidity in the mid of the uncertainties that still remain. I saw Chatri you raise hand again? No?

Sorry, I forgot to unraise. No more questions.

Any more questions?

The question regarding about cost. What do we expect on the cost in the second quarter and for the whole year compared to the first quarter?

Well, costs will grow alongside business activities. But I would say with the demand and high season revenue that's coming in more strongly than the first quarter, which was low season, we're probably going to see higher operating leverage, which going to see margin improvement compared with the first quarter from higher revenue and flow-through from higher operating leverage. But in terms of cost of raw materials, we start to see raw material price coming down. Utility costs, we started to see utility costs coming down compared year-on-year. Interest rate cost, we start to see the likelihood of rate going to peak, even though it's going to stay high, but it's not going to go up any much further from here. So that's good news. So that's probably the trend that we are going to see for the rest of the year.

Next question is on the 3-year -- our 3-year strategy. What kind of EBITDA margins that we are looking at in 2025 in order to get the ROIC of above 10%? And in terms of our ROIC calculation as well, do we take out the perks from the calculation?

Okay. Well, I cannot disclose the exact figure as a confidential information. But what I can say is in 2019, we achieved EBITDA margin pre-TFRS of 18%. Over the next 3 years, we have an aspiration to beat that number. So definitely in '24, '25, the margin -- EBITDA margin, on a like-for-like basis, will be higher than 2019 level.

Could we share about our expected rental expenses in 2023? Is it going to be the same level as pre-COVID '19?

Well, for rental expense, during COVID we got a lot of concessions. But after COVID, that concession or rent reduction has gone. So we probably have to pay higher rent than COVID level. And compared with pre-COVID level, we have structured our rent to be using basket lease as we already explained to you before earlier in previous year, previous quarter. We structured in a way that we have this basket lease and the amount of lease liabilities that we have to book that were not going to be excessive because of this basket lease structure. But in terms of rent expense and payment definitely going to be higher than COVID level. And as for pre-COVID level, we have some of the assets that have lease structure like Boscolo portfolio. So we might probably have to pay a little bit higher rent.

Yes. To add more color on that is that our portfolio mix has changed from 2019. We have more percentage in terms of lease business models compared to 2019. I think the rest of the questions were about EBITDA margin this year. I think Khun Chaiyapat has already mentioned about it several times, but probably another one about EBITDA margins for next year. So what will drive the full recovery in terms of EBITDA margins in 2024?

Well, demand still coming in strong. The cost-cutting still stay. We're still very disciplined about cost control everywhere. Also, not only organic demand that's coming in, we would also try to do other growth, like I said earlier, to improve top line like repositioning program exercise to command higher room rates as well as more hotels opening, more restaurant opening. When revenue coming in more, we have operating leverage. And with the cost control, we would be able to safeguard our profitability and margin. So in '24, we still see demand coming strongly, and we're still trying to strengthen our brand much, much more. And as I mentioned to you during our presentation slide, we will do cross-brand selling strategy to improve both top line and bottom line as well as extract more synergy that we're going to have with NH. Before COVID, we acquired NH, and we start to do some synergy benefit extract exercise with them, but COVID hit. So that -- some of them has been halted, but now we start to get them back on track. We're going to do this synergy an example which is the more -- the bigger economy of scale that we have, we can negotiate with other trade partners or OTA or business count other parts in a more efficient manner and get better deals as well as we can mobilize travelers from this part of the world to Europe and vice versa. And we also just combine our loyalty program between Minor Hotels and Global Hotel Alliance with NH discovery program. Now we have one loyalty program, which comprise more than 21 million members, which make us one of the top hospital loyalty program in the world. So that will also help driving cross usage points, cross redemptions and also business activities overall for us, too. Just to give you some examples. So I guess, if there's no more question, if there is follow-on question later on, our Investor Relations team here. It's happy to respond and address your questions later on. You can send us email. You can call us any time. We're happy to address any of your concern or question. But all in all, recovery is still getting firmer and firmer. We still see second quarter outlook very solid, beating our original budget and expectation that we promised to the Board late last year, and we hope the rest of the year will carry on stronger momentum. Thank you.

Thank you.

So we'll finish our presentation now. Thank you very much.