BTS Group Holdings

BTS Group Holdings Plc (BTS)
- Aggressively expands income base abroad, boosting long term growth
BTS has signed the memorandum of understanding with PT Jakarta Monorail, who
held the 40-year concession in administration (construction and operation) of first
two monorails in Jakarta, Indonesia with the total length of 29.8 km. As we have
additional information, especially about BTS’s yield, there are 2 main parts: 1)
investment advisory income prior to the opening of the project in 2016
(undisclosed amount), and 2) yield after the project is operated, which is in
negotiating process. Further progresses are projected to be recognized late this
year. Initially, there are 2 choices: investing in future via PT Jakarta Monorail
shareholding (projected at below 20% proportion, making BTS recognize yield
through dividend), or being hired under a maintenance and operation contract
throughout 40-year concession. Aside from this agreement, BTS has been seeking
other business opportunities abroad, for example, auction for two lines of
underground railways in Ho Chi Minh City, Vietnam, which the government sector
has been drafting auction condition.
- Achievement in Indonesia projected to be prototype for advancing abroad
Though the income of the project will be recognized in next 3 years, and we have
no exact information about the yield, we expected that BTS would recognize
advisory income from the project in 2013-2015 at the total of B100m (evaluated
from project value of US$800m x 0.4%) From 2016 on, if BTS agree to operate the
railway, according to the second choice, BTS is projected to gain additional
B100m/year profit base, boosting FV for BTS stock by B0.25/share. However, we
haven't included this additional value into FV until clear information is known. This
approach to foreign business is projected to be a prototype for mass transit
business of its expertise in other AEC countries later. This would reduce the risk
from the extension project of government sector, which the auction has not been
definitely scheduled. Overall, this would be a positive sentiment for long term profit
base expansion for the company.
- Attractive dividend in these 3 years, oversea business expansion boosts long term growth
BTS has determined attractive FY2015/2016 dividend at B0.50, B0.58 and B0.67
per share for FY2013/2014, FY2014/2015 and FY2015-2016, respectively, or a
dividend yield of higher than 6.3%/year. Boost in profit base from long term
foreign deal has also been signaled. FV still has 27.4% upside. We reiterate "BUY".