BTS Group Holdings

BTS Group Holdings (BTS)

One-time high tax. Revise down target for secondary businesses
According to the 3Q13 (ended December 2013) analyst meeting, there are two
important issues: 1) 3Q13 effective tax rate was at 42%, or B438.5m, which
was higher than usual, as a result of the following extraordinary items totaling
B214m: 1) B406m from income tax from subsidiary's capital reduction, 2) B191.8
from revision of 2Q13 tax expense, whereas 3Q13 normal tax income was B223m
(21.3% effective tax rate). 2) Purchasing power has been threatened by the
political turmoil, so BTS's advertisement media and property businesses
would be slowing down in 4Q13. Target for FY2013 (ending March 2014)
income from advertisement media business is revised down from 30%yoy to
10%yoy growth. For property business, 85% of total rooms of Abstract
Phahonyothin condominium would be transferred in 2013 (previously targeted at
100%).
- 4Q13 profit to weaken. Maintain forecast
Adding B214.2m tax-related extraordinary items in 3Q13, 3Q13 normalized profit
increased to B664m (previously reported at B449m), growing 14%qoq. Thus, 9M13
profit made up 80% of FY2013 earnings forecast. However, as advertisement media
and property businesses are likely to be affected by the political turmoil in 4Q13,
4Q13 profit is likely to drop qoq. Conservatively, we maintain our forecast,
expecting FY2013 normalized profit at B2.1bn, growing 42%yoy (FY2013 net profit
is projected at B12.7bn, leaping five folds thanks to the establishment of BTSGIF in
1Q13). FY2014 normalized profit is projected to grow by 10%yoy.
- Good dividend for short term and good long-term growth. "BUY"
We derive FY2014 fair value at B11.2, implying 34% upside. This fair value has
already reflected possibly good long-term growth, including B3 added value as BTS
is likely to win the auction for four extension lines. Moreover, BTS has guaranteed
good dividend in next three fiscal years (over 6% dividend yield). We reiterate
"BUY".