Bangkok Expressway
Q4 2011 earnings as expected; a better quarter approaching BUY (maintained) Target Price: Bt21.00 Price (20/02/12): Bt19.50
Bangkok Expressway Plc (BECL)
In line with estimate: BECL posted a 4Q11 net profit of Bt170m, down 62%, both YoY and QoQ. Stripping out extraordinary items, core profit would be Bt179m, down by 61% YoY and 58% QoQ. The result was in line with our estimate and the consensus.
Results highlights: The key reasons for the earnings contraction were: 1) lower proportionate revenue-sharing since March (as stipulated in BECL’s contract with the Expressway Authority of Thailand), starting March 1, 2011, 2) less traffic (BECL’s average daily traffic volume declined by 1% YoY and 3% QoQ to 968,595 vehicles, while NECL’s mean daily traffic volume plunged by 31% YoY and 34% QoQ to 39,151 vehicles, due to an operational suspension forced by the flooding) and 3) a higher SG&A/sales ratio (23.97% in 4Q11, up from 21.12% in 4Q10 and 17.82% in 3Q11), due to reserve-setting for long-term employee benefits (BECL adopted a new accounting standard this year) and office expenses supporting the toll operation.
Outlook: 1Q12 earnings are expected to bounce QoQ, driven by a swift post-flooding rebound in traffic. Average daily traffic volume (BECL + NECL) in Jan 2012 rose by 7% YoY and by 6% from the 4Q11 mean.
What’s changed? We maintain our FY12 net profit forecast of Bt1,724m, up 22% YoY, driven by traffic growth and an expansive earnings contribution from the investment in the power business.
Recommendation: Expectations of an earnings rebound in 1Q12 will act as a share price catalyst in the near-term. Furthermore, the strong FY12 core profit growth outlook of 35% YoY will support the stock price. There would also be scope for upside to our earnings forecast if traffic volume growth were to exceed our estimate of 5%. The stock currently trades at an FY12 PER of 9.0x and a YE12 PBV of 0.8x, discounts to its respective long-term averages of 10.6x and 0.94x. Moreover, the FY12 dividend yield of 6.4% will support the share price. We maintain our BUY rating with a YE12 target price of Bt21, based on a sum-of-the-parts methodology.
