BTS Group Holding

BTS Group Holding Plc (BTS) 

 

BTS expects improvement in its mass transit and media units in FY2017 (Apr 2016-Mar 2017), as well as in its property unit in 2HFY17. We like BTS for its high 2HFY16F DPS of at least Bt0.33 (announcement in June), progress on new mass transit lines in mid-2016, and better-than-expected 4QFY16F results from the absence of property restructuring expenses. BUY with end-2016 SOTP PT of Bt10.5. 

 

Mass transit unit. BTS targets FY2017 ridership growth of 5-6%, backed by organic growth and feed-in from the Purple Line from Aug 2016. It plans for fare rate to grow 1% on a lower discount for the Rabbit card and its O&M revenue to grow by 3-4%. As for its new projects, on March 28, the MRTA signed an MoU with the BMA to transfer project responsibility for South and North Green line extensions to the BMA. BTS is negotiating with the BMA and expects to sign the O&M contracts for these Green Line extensions in mid-2016. On March 29, Cabinet approved the Pink and Yellow Lines, which intersect with BTS’s South and North Green Lines (Laksi and Samrong). BTS will participate in the bidding for these lines, expected to open in mid-2016. BTS also plans to bid/negotiate for the LRT and Grey Line in 2H16 and the Light Green Line in 2017. We have factored Bt1.2/share into our TP for the additional value from two Green Line extensions, but do not yet include other lines.  

 

Media unit. BTS targets FY2017 revenue to grow 50% YoY to Bt3.1bn. Of this, 61% will come from BTS media, 26% from outdoor media, 8% from office building, and 5% from others. Revenue from BTS media will be Bt1.9bn (+5% YoY) from higher occupancy rate and seven new extension stations. Revenue from outdoor media (MACO) will be Bt800mn, as BTS will consolidate MACO’s revenue in FY2017 (holding more than 50% after tender offer completes in May 2016) from recording this as equity income in FY2016 (25% stake). Revenue from office building media will be Bt250mn (+25% YoY), from raising price and adding more buildings. Revenue from other media (i.e. Chamchuri Square and Empire Tower) will be Bt150mn (+240% YoY).  

 

Property unit. BTS targets FY2017 revenue of Bt680mn - Bt620mn commercial and Bt60mn residential. We estimate this to decline 20% YoY from the absence of revenue from Condominium Abstract Phaholyothin 

 

recorded in FY2016. BTS estimates the loss from BTS&SIRI JV at Bt100mn in FY2017, narrower than our assumption of -Bt300mn in FY2016F, from new projects transferred from 2HFY17 onwards. Lastly, because of the high cost burden, BTS cancelled its property business restructuring, removing the Bt560mn restructuring expenses it guided to earlier in 4QFY16-1QFY17F.  

 

Service unit. BTS targets FY2017 Rabbit cards of 6.5mn, up from 6.2mn now. It will be taking a 50% stake (worth Bt750mn) in Line Biz Plus, with the transaction to be completed in April. The rationale is to expand BTS’s electronic payment service business from solely offline to online, accessing the existing 33mn Line users. BTS targets adding 3-5mn users over the first two years and 10mn users within five years, achieving revenue of Bt800-900mn with gross margin at over 60% by that time.