BTS Group Holding

BTS Group Holding Plc 

 

BTS announced its FY2016 (Apr 2015-Mar 2016) targets, i.e. better mass transit, media and service units but softer property unit. Without a catalyst, share price has slipped 8% from 2015’s high, but we still like BTS for its upcoming DPS of at least Bt0.29 in May 2015 and new mass transit projects throughout the year. BUY with SOTP PT of Bt12.50.  

 

Mass transit unit. BTS targets FY2016 ridership growth of 4-6% (vs. 1.3% in 11MFY15); of this, 2-3% will be organic growth and the rest will come from new developments, i.e. condominium and department stores along mass transit lines. BTS expects fare rate to grow 2% on a lower discount for the Rabbit card. O&M revenue is set to grow by 3% to Bt1.7bn. For new projects, BTS expects to sign the new O&M contracts for the South Green Line in the second half of this year (project transfer to BMA from MRTA in June 2015, after which contracts will be drafted) and the North Green Line in 4Q15-1Q16. BTS also expects to see bidding open for the Pink Line and LRT in 2015.  

 

Media unit. This unit is expected to grow 16% in FY2016 (vs. -7% in 9MFY15), backed by better BTS media (60% of total) and office building media (15% of total) outpacing weaker modern trade media (25% of total). BTS media revenue will be expanded 14% by the addition of new platform media and new contracts for seven new stations on the extension line. Office building media revenue is expected to rise 26% from the full year effect of adding 28 more office buildings and more space in Chamchuri Square and Empire Tower. Modern trade media revenue will slip 11% from the end of sales floor media contracts from Tesco Lotus in Feb 2015. Net margin will improve from more contribution from high-margin BTS media.  

 

Property unit. In FY2016, it plans to grow residential property revenue to Bt620mn from Bt343mn in 9MFY15 on transfer of the final 10% of Condominium Abstracts Paholyothin and a new SDH project at Thana City. Without Eastin Grand Sathorn (transferred to NPARK), commercial property revenue will slip to Bt590mn (Bt644mn in 9MFY15); 35% comes from hotel, 40% from Thana City Golf club and 25% from others.  

 

Services unit. BTS will add 13 Chefman branches in FY2016 to the current four branches and these will generate earnings in their first year of operation. It expects to have 5mn Rabbit Cards in FY2016 from 3.5mn now, including the co-branded AEON Rabbit card, which it estimates will give it Bt100/card in fee income; BTS is also providing backing for up to Bt4.75bn in personal loans and on this it will get yield of 8% p.a. (4% coupon rate and 4% profit sharing).  

 

4QFY15F earnings. The ~Bt2.4bn extra gain from the sale of land to NPARK will be booked in 1QFY16 rather than 4QFY15 as the asset swap (BTS’s hotel and land worth ~Bt8-10bn in exchange for 35.6% NPARK shares) is taking longer than expected. We estimate 4QFY15 profit at Bt490mn, +8% YoY but -50% QoQ; the YoY growth is from lower interest expense (bond repayment) and improvement in services sufficient to offset the fall in mass transit (fewer riders during last year’s unrest), media (weaker modern trade media), and property (fewer units transferred). The drop QoQ reflects no repeat of the comparative quarter’s gain from the sale of land. Given its committed dividend payment, we expect a final DPS of at least Bt0.29/share in May 2015F.