Bangkok Expressway

Bangkok Expressway Plc (BECL)

In line with estimates

BECL posted a 4Q14 net profit of Bt1,080m, up 163% YoY and 41% QoQ. Stripping out the Bt537m gain on sales of investments, core earnings would be Bt543m, up 165% YoY but down 29% QoQ. While the bottom line was above our estimate, due to an extra gain, core profit was in line with our estimate and that of the consensus.

Results highlights

The YoY core profit growth was driven by: 1) greater traffic, 2) increased profit-sharing from TTW and CK Power (Bt153m in 4Q14 against Bt51m in 4Q13), 3) lower SG&A expenses—the SG&A/sales ratio declined to 22.2% from 25.5% in 4Q13—and 4) lower interest expenses (down 9% YoY), due to lower interest rates. Total average daily traffic volume (BECL+NECL) rose 6% YoY and 2% QoQ to 1.14m trips, while the average daily toll revenue increased 6% YoY and 3% QoQ to Bt24.2m. Meanwhile, the QoQ core earnings contraction was due to: 1) higher SG&A expenses—the SG&A/sales ratio increased from 18.6% in 3Q14 and 2) higher effective tax rate—rising to 38.8% from 20.1% in 3Q14.

Outlook

We expect the firm’s 1Q15 core earnings to increase YoY and QoQ, driven by greater traffic, higher average daily toll revenue, greater profit-sharing from TTW and CK Power, and normalization of expenses. Historical data show that BECL’s consolidated first-quarter traffic volume normally expands about 1% QoQ. 

What’s changed?

We maintain our FY15 net profit forecast of Bt2,818m unchanged.  

Recommendation

Even though BECL’s 1Q15 earnings outlook is improving, we think that the share prices will be dictated by the swap ratio between the firm and BMCL. The current share price implies a Bt0.75 upside to reflect the equilibrium point of the swap ratio. As such, the share price upside/downside is likely to be limited by the swap ratio. Valuation-wise, the current share price trades at an YE15 PER of 11.4x, 0.6SD above its long-term mean of 9.7x and an FY15 dividend yield of 5.0%, lower than its long-term yield of 6.1%.

BECL announced the final dividend of Bt1.70 (DPS of Bt0.80 was paid for its 1H14 operation), implying a 2H14 dividend yield of 4.2%. The XD date will be 2 March and the payment date will be 9 April.