BTS Group Holding Plc

BTS Group Holding Plc

 

Based on its FY2016 guidance, we expect growth in mass transit, media, and service units to outpace the weaker property unit, resulting in moderate core profit growth of 10%. We like BTS for 1) its outstanding 1QFY16 (Apr-Jun 2015), largely on the Bt2.3bn extra gain from the U City deal; 2) attractive dividend yield of 7% (committed payment of Bt8bn in FY2016); 3) progress on new mass transit projects this year. Maintain BUY with SOTP PT of Bt12.50.   

Mass transit unit. BTS maintains its target FY2016 ridership growth of 4-6% (vs. 2% in FY2015) and 2% fare rate growth after cutting the discount for users of the Rabbit card. O&M revenue is expected to grow by 3% to Bt1.7bn. As for its new projects, BTS reports that the new O&M contracts for the North and South green lines will be delayed for about a quarter. The BMA is asking the Ministry of Transport permission to transfer both North and South Green lines from the MRTA to the BMA simultaneously in 3Q15. BTS then expects the BMA to negotiate O&M contracts for both in 4Q15-1Q16. BTS expects the bidding/negotiating for the Pink Line and LRT in 2015, Grey Line in 2016 and Light Green Line in 2017 (Figure 1).  

Media unit. BTS has reduced its expected revenue growth for the media unit to -12% from +16% in FY2016 (vs -6% in FY2015), factoring in the lapse of modern trade contracts with Tesco Lotus and BIGC. BTS expects media revenue to grow 14% upon 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 of more office buildings and more space in Chamchuri Square and Empire Tower. Even without the modern trade media, which offered only a low margin, BTS expects YoY growth in media earnings. 

Property unit. In FY2016, it estimates property revenue of Bt1.2bn (-11% YoY). Residential property revenue is estimated at Bt620mn (+49% YoY) from transfer of the remaining 10% of Condominium Abstracts Paholyothin and a new SDH project at Thana City. Without Eastin Grand Sathorn (transferred to U City), its commercial property revenue will slip to Bt590mn (-37% YoY). BTS and SIRI JV (residential property): It will launch its first JV project near BTS Mo Chit station, with Bt5.8bn sales value (high-rise condo with 873 units). With good response, BTS expects presales at this weekend’s opening to beat its earlier target of 50%; units will be transferred in June 2018. It targets 12% net profit margin. It targets JV revenue at Bt25-30bn over the next 3-5 years. U City (commercial property): With a 35.6% stake in U City as of 1QFY16, BTS plans future development of a mixed-use commercial project (i.e. hotel and office building) with U City. 

Services unit. BTS revised its FY2016 planned expansion to 6-9 big Chefman branches from 13 small earlier, which gives more expansion space. These will generate earnings after 1-3 years of operation. It targets 5mn Rabbit Cards in FY2016 from 3.5mn now, including the co-branded AEON Rabbit card, which will give it Bt100/card in fee income. BTS estimates it will extend ~Bt900mn in personal loans and on these it will get yield of 8% p.a. (4% coupon rate and 4% profit sharing).