Bangkok Expressway

Bangkok Expressway Plc (BECL)

In line with estimate: BECL posted a 2Q12 net profit of Bt1,052m, up by 312% YoY and 157% QoQ, driven by extra gains. Stripping out gains from divesting Bt1,166m in South East Asia Energy (SEAN) shares and from sales of fixed assets of Bt2m, core earnings would be Bt274m, up 10% YoY but down 33% QoQ. Net profit was in line with our estimate (but 6% above the consensus). However, the core number was 11% below our model and the street, due to lower equity earnings from associates and higher SG&A expenses than expected.
Results highlights: The driver of the 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 factors behind the QoQ core earnings drop were: 1) lower traffic numbers, due to seasonality (BECL’s consolidated mean daily traffic volume dipped 4% QoQ), 2) no dividend income during the quarter (in 1Q12 TTW paid a Bt92m dividend (BECL has a 9.24% stake), 3) loss-sharing from its investment in CK Power and 4) an SG&A/sales ratio rise (to 23.1% from 21.8% in 1Q12), due to higher insurance costs.
Outlook: BECL’s core earnings should rise further (both YoY and QoQ) through 3Q12, driven by high seasonal demand, dividend income from TTW and a greater earnings contribution from CK Power. The historical data show that the firm’s consolidated third-quarter traffic volume normally expands by about 4% QoQ. Traffic growth in July 2012 was up 5% YoY and was 4% above the 2Q12 mean. We also expect BECL to book dividend income from TTW of Bt81m in 3Q12.
What’s changed? Even though 1H12 core profit comprises only 38% of our FY12 forecast of Bt1,776m, we maintain it unchanged, as second-half traffic normally rises HoH and CK Power is expected to contribute greater earnings in 2H12.
Recommendation: We think expectations of strong core profit growth 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 8.6x, a discount to its long-term average of 10x. Moreover, the FY12 dividend yield of 6.7% will support the share price.