BTS Group Holdings
Profit to revise up 100% after selling subsidiary in Phuket and VGI BUY
BTS Group Holdings Plc (BTS)
BTSC announces sale of all investment in Kamala Beach Resort Co., Ltd.
Yesterday Bangkok Mass Transit System Public Co., Ltd or BTSC (BTS holds 96.44% stake) has announced a news of selling all investment in Kamala Beach Resort Co., Ltd which is a subsidiary that BTSC has directly hold 100% stake for one irrelevant company, therefore the mentioned company has ended being BTSC’s subsidiary immediately. The reason of this sell is because
BTS no longer aims to develop the main area of Kamala Beach Resort Co., Ltd that has the total area of 455 rais which is located in Kamala beach, Amphoe Kathu, Phuket. From this particular sell of which the trading conditions have been published on 12 June 2012, BTSC will gain B1.64bn of
return from selling investment in Kamala Beach Resort Co., Ltd as the book value in Kamala Beach Resort Co., Ltd has currently stood at B1.24bn.
Extraordinary profit recognition from selling subsidiary projected at B385m, boosting profit constantly by 2 quarters
BTS is projected recognize B385m of extraordinary profit from selling investment at B1.64bn of Kamala Beach Resort Co., Ltd (offset by the cost of Kamala Beach Resort Co., Ltd, using BTSC’s equity method, at B1.24bn considering from BTS’s 96.44% stake in BTSC). Since BTS will not have the tax expenditure from BTSC which still has benefited from loss carry back that can be included in calculation with loss carry forward, as the right is valid until end-2012 at around B11bn, BTS’s net profit is likely to grow outstandingly in 2Q12/13 due to the abovementioned extraordinary profit. Consequently, the company’s net profit in 3Q12/13 is projected to increase continuously since the norm profit tends to improve QoQ as a result of a gradual launch of 35 new trains for Sukumvit extension since October onward and the additional extraordinary profit from selling investment in another subsidiary that is VGI Global Media Company Limited (VGI) at 62 million
shares along with public offering (trading projected to be on 11 October 2012). Preliminary, BTS’s FY2012 net profit is projected to stand at around B3.2-3.4bn or the growth of 55-60% YoY which is beyond our projection at B1.56bn (64.4% YoY growth of norm profit), so our forecast might be revised up by approx 100% soon. In addition, the cash that BTS is going to obtain from the 2 mentioned deals is projected to be high at B3-3.5bn, likely to benefit shareholders in the future in terms of, for example, repaying debt before due date which will help ease the interest expense, and also the extraordinary dividend.
Current FV is B6.40 with 19.6% upside. Reiterate “BUY”
Although BTS’s share price has to be pressured from the number of shares that might increase from converting debenture (convertible debenture holders can use the right at price of B5.12/share) and convert of BTS-W2 (the strike price is B4.375/share, valid in November 2012 onward) at 2,440 million shares in total (20.5% share dilution effect), FY2012 norm profit
tends to thrive while the extraordinary profit mentioned above will offset all of the dilution effect. Under the fair value at B6.40/share which is fully diluted with 19.6% upside, we reiterate our recommendation “BUY”.
