Bangkok Expressway

Bangkok Expressway Plc (BECL)
Investment thesis
High seasonal demand for expressway usage in the second-half of each year together with expectations of better earnings in 2H13 should catalyze the share price going forward. We also like BECL’s long-term profit growth story—there is a scope for upside from the investment in the Xayaburi hydropower project. The stock currently trades at an FY14 PEG ratio of 0.4x—equal to the Thai Transport sector average, but a discount to the regional mean of 1.3x—and at an FY14 dividend yield of 5.6%, much higher than the Thai transport sector average of 2.5% and consistent with the regional mean.
Sept 2013 traffic rose YoY, but declined MoM
Yesterday, BECL reported its expressway traffic numbers for September—average daily traffic volume (BECL+NECL) was 1.10m trips (1.03m trips for BECL and 69,214 trips for NECL). Traffic in September this year rose 1.8% YoY but declined 2.2% MoM.
The MoM traffic contraction went against the historical pattern; normally average daily traffic expands by an average of 1.4% MoM in Sept. The toll hike which took effect on September 1 probably caused the decline. However, the MoM traffic contraction was milder than the effect of the last hike in September 2008, which traffic fell 3.2% MoM.
Revenue increase more than offset effect of traffic decline
Despite the MoM traffic slippage in Sept, revenue rose—higher per-vehicle toll revenue more than offset the effect of fewer cars using BECL’s expressways. Average daily toll revenue in September increased by 9.4% YoY and 4.6% MoM to Bt23m.
Strong core earnings growth expected for 3Q13
Regardless of the toll hike in September, average daily traffic volume (BECL+NECL) in 3Q13 still posted an increase of 2.4%, both YoY and QoQ, to 1.11m trips. We, therefore, expect BECL to post strong core earnings growth, both YoY and QoQ, for the quarter. 
Expect October 2013 traffic numbers to rebound MoM
Even though this month is normally a period of seasonally low expressway usage, due to school holidays (mean daily traffic in Oct normally softens about 0.4% MoM), we expect BECL’s traffic numbers to rise MoM in October 2013. Historical data show that traffic usage rose 2.8% MoM in October 2008—the second month following the last toll price hike.
The reason is psychological in nature—drivers initially resent toll fee increases, so cut back usage. But after some weeks, the convenience of being able to swiftly traverse long distances across Bangkok trumps resentment over higher prices.