BTS Group Holding

BTS Group Holding Plc (BTS)

2QFY13F net profit of Bt580mn. We expect a strong 2QFY13F net profit of Bt580mn
(vs. Bt1.3bn in 2QFY12 and Bt309mn in 1QFY13), mostly from a Bt250mn in extra gain
from the sale of land at Kamala beach, Phuket and plus Bt330mn in core earnings,
+21% YoY and +2% QoQ. Core earnings growth is backed by more riders (+11% YoY in Jul-
Aug 2012) and new modern trade contracts for Big C Extra (sales floor area) in 1QFY13.
Further rise in 3QFY13F net profit. We expect 3QFY13 net profit to then go on up to
a record high. Apart from huge extra gains of Bt1.6bn from the sale of 62mn shares in
VGI (IPO price of Bt35/sh versus its average cost at Bt9.7/sh), core earnings are poised
to be robust. Backing this is: 1) growth in ridership from the new carriages (+23%) and
the opening of a new extension line (Wongwianyai – Bangwa) in Dec 2012; and 2) the
rise in revenue from non-BTS media (new multimedia contracts at Big C and Big C
Extra) and BTS-media contracts (new carriages) in 3QFY13.
Earnings revision. We raised its earnings by 110% to Bt3bn in FY2013F but trimmed
FY2014F by 8% to Bt1.7bn and FY2015F by 3% to Bt2.2bn. The huge jump for the current
fiscal year comes mostly from the extra gains of Bt1.8bn - Bt250mn from the sale of
land in 2QFY13 and Bt1.6bn from the sale of VGI stake in 3QFY13. However, operations
are also doing very well and we raised its media revenue growth to 15-16% from 8-10%
in FY2014-15F to reflect the new modern trade contracts (non-BTS media) and new
carriages (BTS media). The trimming for the subsequent two years factors in the
reduced contribution from VGI upon a cut in stake to 70.7% from 96.4% from 3QFY13.
Maintain BUY. We maintain BUY, with the revision leading to a new mid-13 SOTP PT
of Bt6.5 (from Bt5.9), fully diluted and not yet including the upside from new O&M
contracts at Bt0.2-0.3/sh. Our PT consists of DCF valuation (FY2013-30; 9% WACC and 0%
growth) for its mass transit, 14x PE for its media unit, and 1.0x PBV for its property
unit. ST catalysts: 1) valuation re-rating from the listing of VGI on October 11, 2012
(+10% in VGI from IPO price implies +1% in BTS’s fair value); 2) strong earnings in
2QFY13-3QFY13F. We also like BTS over the longer term, with the highest earnings
growth in its sector with earnings CAGR of 33% p.a. in FY2012-15.