BTS Group Holdings
Big change in property development business Rec. : BUY BUY
BTS Group Holdings Plc (BTS)
- 35.64% stake in NPARK to strengthen property business
BTS holds 35.64% stake in NPARK through 200 billion newly-issues ordinary shares at B0.047 and 100 billion five-year NPARK-W2 warrant units at the exercise price of B0.047 and the exercise ratio of one warrant unit to one ordinary share (NPARK-W2 is not SET-listed and will not be traded through the SET) and sells all shares in BTS Assets Co., Ltd. and Kamkung Properties Co. comprising 1) Eastin Grand Sathorn, 2) lands on Phaholyothin Road (near BTS Mo Chit Station), and 3) lands on Phayathai Road (near BTS Phayathai Station) totaling 18 rais. The market price of the newly-issued shares in NPARK and the land is B9.4bn. According to NPARK's shareholders' meeting on December 2014, it was approved that BTS can hold NPARK new shares without tender offer.
- Added value in long run
The synergy would strengthen BTS's property business, raise the value of the business, and boost rental income in a long run. However, BTS would have to recognize NPARK's loss via equity method from 1Q15/16 (April-June) on. NPARK posted net loss of B629m in FY2014 (B349m normalized loss excluding impairment loss), expected to face B224m net loss in FY2015. The two subsidiaries sold by BTS also faced net loss of B131m in 2014. After the consolidation of the financial statement, BTS’s profit is projected to decrease by not more than B100m or 3-4% from the initial forecast. Still, the value of the two subsidiaries sold to NPARK would be actually higher than the book value, thus resulting in B2-3bn extraordinary profit. We maintain our forecast.
- 7% dividend yield limits downside
The share price has undergone correction and remained low for many months, lower than the cost of B9.35 (excluding dividend) during the repurchase program. Owing to 7.3% dividend yield, BTS has limited downside. We recommend BUY for BTS(FV@B12).
