BTS Group Holdings
Strong earnings as expected; next quarter to be even better In line with estimate
BTS Group Holdings Plc (BTS)
BTS posted a 2Q12/13 (July-Sept) net profit of Bt691m, down 46% YoY but up 123% QoQ (in 2Q11/12, the firm received a belated Bt1bn payout from the Treasury Dept). Stripping out a Bt289m gain from the divestment of land in Phuket, 2Q12/13 core profit would be Bt395m, up by 45% YoY and 22% QoQ. The result was in line with our forecast and the consensus.
Results highlights
The drivers of the strong core profit growth were: 1) greater ridership numbers (up by 9% YoY and 6% QoQ to 49.4m pax), 2) a higher average fare price (up by 4% YoY and 2% QoQ to Bt25.10), 3) a greater earnings contribution from its media subsidiary, VGI Global Media Plc, and 4) better numbers at its property business. Media income expanded by 38% YoY and 14% QoQ to Bt725m, due to aggressive penetration into modern trade and higher receipts from BTS-related media.
Property business revenue rose by 5% YoY and 25% QoQ to Bt194m, driven by the partial opening of Eastin Grand Hotel (though only eight units were transferred at Abstracts Sukhumvit 66/1 Condo against 14 in 2Q11/12 and 10 in 1Q12/13). Overall operating EBITDA margin expanded to 51.8% in 2Q12/13 from 50.0% in 2Q12/13 and 49.6% in 1Q12/13.
Outlook
BTS’s earnings growth should sustain momentum through 3Q12/13 (Oct-Dec), driven by high season for its mass transit and media businesses and extra gains. We also anticipate that the firm will book extra gains of Bt1.5bn from the sale of some VGI shares and Bt767m from the sale of a land plot near the Nana BTS station in 3Q12/13.
What’s changed?
Even though 1H12/13 net profit comprises 28% of our FY12/13 net earnings forecast of Bt3,806m, our forecast stands unchanged, as big extra gains will be booked in 3Q12/13. There may be scope for an upgrade—1H12/13 core profit already represents 59% of our FY12/13 forecast and second-half core numbers normally rise HoH.
Recommendation
We expect strong 2H12/13 earnings growth to catalyze the share price. Moreover, there is scope for upside to our FY13/14 bottom-line forecast from further sales of land plots. In our view, the sales of net farebox revenue to a planned Infrastructure Fund would be a share price catalyst going forward, as it would be expected to generate earnings accretion both in the short- and long-term. Valuation-wise, BTS is undemanding—an end-March PBV of 1.8x, deeply discounted to the regional mean of 2.7x.
