BTS

BTS Group Holding Plc (BTS)

Its earnings in 2HFY13F (Oct 2012-Mar 2013) are expected to be a new
high, backed by 1) extra gains on the sales of VGI/land at Bt2.2bn in
3QFY13; 2) potential gain on the sales of farebox revenue from its core
skytrain system to infrastructure fund at Bt4-10bn in 4QFY13; 3) robust
core earnings for all business units (mass transit, media, and property).
A special DPS is possible given the massive cash/gain on extra items.
Maintain BUY with SOTP PT of Bt7.8.
2HFY13 net profit at record high. We expect 2HFY13 (Oct 12-Mar 13) net profit to be
a record high. In 3QFY13, BTS will record extra gains of Bt2.2bn (included in our
forecast), consisting of Bt1.6bn gain from the sale of VGI shares for listing and
Bt680mn gain from the sale of land at Sukhumvit. In 4QFY13, it may record extra gains
of Bt4-10bn (not yet in our forecast) from the setup of an infrastructure fund to which
it will sell farebox revenue from its core skytrain system; target proceeds are Bt50-
60bn. Core earnings will be robust, backed by: 1) growth in ridership from the new
carriages (+23%) and the opening of a new extension line (Wongwianyai–Bangwa) in
4QFY13; 2) a continued rise in revenue from non-BTS media (new multimedia contracts
at Big C/Big C Extra) and BTS-media contracts (new carriages); 3) units transferred in
its condominium Abstracts Sukhumvit 66/1 in 2HFY13 and Paholyothin in 4QFY13.
Possible special DPS. A special DPS is possible, based on the excess cash and gain
from the sale of land of Bt6bn (Bt0.6/sh) and listing of VGI of Bt2.5bn (Bt0.3/sh), as well
as potential cash of Bt23-29bn (Bt2.3-2.9/sh) and gain of Bt4-10bn (Bt0.4-1.0/sh) from
the sale of farebox revenue to an infrastructure fund. However, we expect BTS to keep
most of this aside for new investment. Note that in FY2012 BTS announced an interim
dividend in early January with payment in February.
Infrastructure fund. Bangkok Mass Transit System (BTSC, 97.46% held by BTS) plans
to sell the net farebox revenue from the core skytrain system to an infrastructure fund
in 4QFY13F; it will take one third of the fund. We estimate this will give it extra gains of
Bt4-10bn in 4QFY13F, while its FY2014-15 core earnings are relatively unchanged, based
on 90% dividend payout for the fund (no depreciation/tax expenses), the sale of 67% of
its stake, ~55% of the earnings from the core mass transit system, and management
fee at ~2% of farebox revenue. The Bt50-60bn its expects to receive from setting up
this fund are relatively close to our DCF valuation, but will provide upside in the form of
funding for potential new mass transit investments that will open for bidding next
year.
Maintain BUY. We maintain BUY with end-13 SOTP PT of Bt7.8, fully diluted and not
yet including the upside from new O&M contracts at Bt0.3/sh. Our PT consists of
Bt5.5/sh for mass transit (DCF ending FY2030, 9% WACC and 0% growth), Bt1.3/sh for
media (market price), and Bt1.0/sh for property (book value).