Bangkok Expressway

In line with estimate

BECL posted a 3Q14 net profit of Bt763m, down 18% YoY but up 14% QoQ. Core earnings were also Bt763m, down 18% YoY but up 22% QoQ. The bottom-line was in line with our estimate, but was 5% above the consensus.

Results highlights

The YoY core profit contraction was due to lower other income. Meanwhile, the drivers of the QoQ core earnings growth were: 1) greater traffic, 2) increased profit-sharing from TTW and CK Power (Bt135m in 3Q14 against Bt125m in 2Q14), 3) lower SG&A expenses—the SG&A/sales ratio declined to 18.6% from 22.0% in 2Q14—and 4) lower interest expenses (down 7% QoQ), due to lower interest rates. Total average daily traffic volume (BECL+NECL) rose by 1% YoY and 5% QoQ to 1.12m trips, while the average toll fee increased 5% YoY and was stable QoQ at Bt21.05/trip. 

Outlook

We expect the firm’s 4Q14 earnings to increase YoY, driven by greater traffic, higher average daily toll revenue and greater profit-sharing from TTW and CK Power. Even though the fourth-quarter is normally high season for expressway usage—historical data show that BECL’s consolidated fourth-quarter traffic volume normally expands by about 3% QoQ—we expect the firm’s earnings to slip QoQ, due to lower profit-sharing from TTW and CK Power. 

What’s changed?

The 9M14 net profit represents 80% of our FY14 earnings forecast of Bt2,663m, which we maintain unchanged.  

Recommendation

Even though BECL’s 3Q14 earning outlook is improving in tandem with the advent of high season and a domestic economic recovery, we think that neither its current FY15 PER of 11.0x (0.5SD above its long-term mean of 9.9x) nor its dividend yield for FY15 of 5.2% (lower than its long-term yield of 6.1%) is attractive. Moreover, we don’t see any obvious share price catalysts in the foreseeable future, given the firm’s slower earnings growth profile—a net profit CAGR of 6% for FY14-16 against 35% for FY12-14.