BTS Group Holdings

Investment thesis

Last week, we accompanied Mr Surapong Laoha-unya, executive director, and Mr Surayut Thavikulwat, CFO, on a non-deal roadshow to local fund managers. In all, we sensed that the investors we met are no longer concerned about the risk of delays to the opening of tenders for mass transit extensions; they are now looking ahead to the firm’s long-term growth prospects from all key businesses—new mass transit lines, media, property and service. The key takeaways were as follow: 

Tenders for new mass transit extensions expected to open soon 

The new interim Cabinet is prioritizing state infrastructure projects, particularly mass transit projects. As such, tenders are expected to open soon for civil work and operating contracts for mass transit extensions. The deadline for bids for the civil work contract for the Dark Green North Line is September 30; tenders for civil work and operating contracts for other mass transit lines are expected to follow. BTS believes it is well-positioned for six new contracts, as it has proven expertise at operating a mass transit system and a strong financial position.

Potential offshore investments

Even though the BTS-CITIC consortium is unlikely to win the bid for the 30-year management concession for Line 16 of the Beijing Subway, we think it is a good opportunity for the company to introduce itself to the regional market. This could open up opportunities for it to expand its mass transit business in the region. There are several mass transit projects in neighboring countries that have invited BTS to bid on contracts. However, management said that the firm’s primary focus is investing in domestic mass transit projects.

Good long-term growth prospects for media and property units  

Despite short-term revenue hiccups at the media and property businesses, due to the recession, the long-term growth prospects for media and property remain good. VGI has considerable scope to expand over the long-term in the out-of-home advertising niche. With regard to property, the firm has a good sized land bank on which to build new projects when conditions are more favorable.

Financial capacity for both dividends and new investments 

With its strong balance sheet, BTS should have substantial financial capacity to invest in domestic new mass transit projects and pay a good dividend. Moreover, the expected proceeds from the conversion of BTS-W3 warrants will enable the firm to invest in new opportunities as they arise.