Thai transport giant targets region after amalgamation
BANGKOK EXPRESSWAY and Metro Plc (BEM), an integrated transport firm merging toll road and metro line networks, is ready to gear up with greater capital and competency strengths to compete with rivals on the regional stage.
“After the merger deal is successfully completed, it will have total paid-up capital of Bt15 billion at par value of Bt1 each,” Phongsarit Tantisuvanitchkul, director of Bangkok Metro Plc (BMCL), said in an exclusive interview with the Nation Group last week.
High market cap
The combined market capitalisation would exceed Bt70 billion and rank it in SET50 stocks, he added.
BEM, which is an amalgamation of Bangkok Expressway Plc (BECL) and BMCL, subsidiaries of a leading contractor Ch Karnchang Plc (CK), is aimed at becoming the leading transport company in Asean.
Phongsarit said the deal should be satisfactory for all shareholders of BECL and BMCL, not only its parent company Ch Karnchang (CK), a leading contractor.
BEM would become a “growth-plus-dividend” stock, derived from a combination of BECL as a dividend stock and BMCL as a growth stock.
He added that this was a combination of both companies’ strengths in different areas – toll roads and metro line network – that would create a new entity with a large capital and stronger financial status.
BECL is currently an operator of the second stage expressway system for A-B-C-D sector under two concession agreements that end in 2020 and 2027 respectively, and the second stage Si Rat outer Bangkok ring road expressway, expected to start operation next year.
Without the Si Rat expressway, BECL operates 70.5km of total services, including the northern stage expressway (Bang Pa In-Pak Kret sector) which is under operation of its subsidiary. Traffic exceeds 1 million journeys a day with estimated operating revenue of Bt6.55 billion this year.
Meanwhile, BMCL has now been granted two out of four mass transit systems, concession agreements to construct and operate. They are the initial Blue Line with rights to operate commercial development ending in 2029, and Purple Line, which is now under construction and expected to start operation next |year.
The company operates a total of 20km distance services with 260,000 trips a day, generating operating revenue of Bt1.77 billion this year.
Phongsarit said BEM would focus on three main business areas – rail, toll road, and commercial development. The rail business will cover metro lines, high speed and double-track railways while the toll road will focus on expressways and motorways.
Regarding the commercial |development business, he said it |would cover advertising, retailing, and real estate, in which BEM |could gain more benefits from |utilisation of integrated areas of BECL and BMCL; for example, using an area near the entrance |and exit route of an expressway as parking lots for rail transits.
“Nothing is likely to be changed in terms of the management team,” said Phongsarit.
Looking at the financial status of BMCL, he said the company has already cleaned up all Bt13 billion in retained debts. The new company, BEM, would have a combined equity and cash of Bt7 billion to Bt8 billion.
He added that the high capital of BECL would result in the new company’s debt-to-equity ratio being lower at 1.3 times, giving it more flexibility to seek funds at a lower financial cost.
As BMCL’s rail business has greater potential for growth for new investments than BECL’s toll road business, this would make the rail business under BEM get more loan leverage.
“Based on debt-to-equity ratio of 1.3 times, BEM will have larger room for new loans of up to Bt20 billion. The cost of funds will also be reduced to only 3-4 per cent per annum, compared to 7 per cent for the current borrowings of BMCL,” said president Sombat Kitjalaksana.
In terms of the government’s new investment projects, Phongsarit said BEM was ready to join them even if they would be as bidders or participation via Public Private Partnership (PPP) scheme.
“The years 2016 and 2017 will be a golden period for BEM with more revenue coming from operations such as the Si Rat expressway and Purple Line,” said Phongsarit.
BEM, after being approved by the joint extraordinary shareholders’ meetings of BECL and BMCL on December 28 for their amalgamation deal, was set for business registration on December 30 ahead of its first trading day on January 5. Trading in BECL and BMCL shares will be suspended starting today |and they will be eventually delisted from the Stock Exchange of Thailand.
Based on swap ratios, each BECL share will be exchanged with the new entity at 8.65537841 share and 0.42050530 share for every BMCL share. CK will hold the biggest stake at 27-28 per cent of BEM, followed by Mass Rapid Transit Authority of Thailand with 9 per cent, Krungthai Bank 6 per cent and Bangkok Bank 2-3 per cent.
BECL shares on Friday were up 3.43 per cent, closing at Bt45.25 and BMCL rose by 3.74 per cent to close at Bt2.22 each.
