Bangkok Expressway

Bangkok Expressway Plc (BECL)

Investment thesis: We think expectations of strong 2Q12 earnings together with sustained core profit growth momentum in 3Q12 and a forecast FY11-14 core profit CAGR of 27% will catalyze the share price. Furthermore, value additions from the planned Si Rat-Outer Ring Road Expressway Project (Sector B+) should prompt a consensus projection upgrade, which would boost the share price further. BECL currently trades at an FY12 PER of 8.8x, a discount to its long-term average of 10x. Moreover, the FY12 dividend yield of 6.6% will support the share price.
Expect strong 2Q12 net profit growth: We anticipate that BECL will post 2Q12 net earnings of Bt1,083m, up by 325% YoY and 164% QoQ, driven by an extra gain. Stripping out the extra gain from divesting Bt1,150m in South East Asia Energy (SEAN) shares, 2Q12 core profit would be Bt307m, up 24% YoY but down 25% QoQ. The key driver of the estimated YoY core profit growth was greater traffic numbers—BECL’s (including NECL) average daily traffic volume rose 5% YoY to 1,051,738 trips in 2Q12.
The key factors behind the QoQ core profit contraction were: 1) lower traffic numbers, due to low season (BECL’s consolidated average daily traffic volume declined 4% QoQ) and 2) no dividend income received during the quarter—in 1Q12, the firm booked dividend income from TTW (BECL has a 9.24% stake) of Bt92m.
While we maintain our FY12 core earnings forecast unchanged, we have revised down our FY12 net profit projection by 8% to Bt2,552m to fine-tune for the expected extra gain from divesting SEAN shares.
Core profit growth sustainable through 3Q12: BECL’s core earnings should rise further (both YoY and QoQ) through 3Q12, driven by high seasonal demand and dividend income from TTW. The historical data show that the firm’s consolidated third-quarter traffic volume normally expands by 4% QoQ on average. We also expect that BECL to book dividend income from TTW of Bt81m in 3Q12, as TTW announced a payout of Bt0.22/share for 1H12 operations.