BTS Group Holdings

BTS Group Holdings Plc (BTS)
 

Investment thesis: The key messages from the analyst meeting reaffirmed our optimistic view with regard to BTS’s mass transit and media businesses. Concerns about the legal action against the new O&M contract may generate negative sentiment toward the stock, but we think those concerns are already priced in. Sustained strong ridership growth together with media business expansion will catalyze the share price performance going forward. 
Mass transit & media the growth drivers this year: Ridership is conservatively forecast to grow by 12-15% YoY in FY12/13, driven by increased demand for mass transit, a full operational year for the Onnut-Bearing extension and the opening of the Wongwian Yai-Bang Wa Line late this year (following 21% YoY growth in FY11/12). In addition, a fare price increase is expected in 2013.
Media revenue is forecast to expand by 40% YoY in FY12/13, comparable to the FY11/12 rate, driven by a full year of billings to Big C, new business from Big C Extra (previously Carrefour) and new multimedia business. Given the increased contributions from non BTS-related media billings, the GPM of the Media unit is expected to soften to 55% from 59% last year. At the property operation, condo presales have regained momentum—as of end-March, bookings at Abstracts Sukhumvit 66/1 rose to 66% (from 63% at YE11) and at Abstracts Phahonyothin to 54% (from 53% at YE11). However, profit will be squeezed by increased OPEX with the opening of BTS’s new Eastin Grand Hotel.
Earnings upside on the cards: There is scope for better numbers from all key businesses. Ridership growth in April was 21%, well above the firm’s target range of 12-15%. If growth were to sustain momentum throughout this year, an earnings forecast upgrade would be likely. Media unit management is talking to new clients; contracts should be agreed later this year. Moreover, our projection would be upgraded if condo sales were to meet targets—all Abstracts Sukhumvit 66/1 units are to be booked and transferred in calendar year 2012, while at Abstracts Phahonyothin 70% of the units are to be booked in CY12 and 15% transferred in FY12/13. 
Sales of vacant land plots in progress: BTS guides that it is negotiating potential sales of unused land plots in Phuket Province, Phayathai Road and Soi Nana. Some of the plots should be sold by 2013. We expect the firm to book gains from the sales, as land prices have risen significantly in recent years.