Bangkok Expressway

Bangkok Expressway Plc (BECL)

Investment thesis
We think expectations of strong earnings growth in 4Q12 will trigger a share price rise in the near-term. Moreover, potential increases in toll fees in September 2013 would constitute a medium-term share price catalyst. In the meantime, our forecast FY11-14 core profit CAGR of 27% suggests scope for a valuation re-rating. BECL currently trades at an FY13 PER of 11.1x, a slight premium to the regional average and to its long-term mean. However, its FY13 PEG of 0.5x is much lower than the Asian average of 3.0x. Moreover, the FY13 dividend yield, which we assume at 5.2%, should support the share price.   
Record high traffic numbers for November 2012
Last Friday, BECL reported record high expressway traffic numbers for November 2012—average daily traffic volume (BECL and NECL) was 1.137m trips (1.064m trips for BECL and 72,379 trips for NECL). Traffic in November jumped by 10.1% YoY (due to the low base effect caused by flooding last year) and 5.2% MoM. The MoM traffic growth of 5.2% in November 2012 was well above the historical average of 3.9% MoM growth for the month of November.
YTD traffic growth sustained above projections
BECL’s 11M12 average daily traffic volume increased by 6.4% YoY to 1.084m trips—more than the firm’s FY12 projection of 5% growth and better than our FY12 traffic expansion forecast of 5.8%. If traffic growth momentum were sustained strong through to YE12, there would be scope for upside to our FY12 earnings model. Assuming traffic growth of 6.4% for FY12, our core profit forecast projection would be raised by another 2% from the current number, which would imply strong YoY core earnings growth of 41%. 
Expect traffic numbers for December to be even stronger
Even though the historical data for the month of December tends to be flattish MoM, we expect traffic numbers for December 2012 to post MoM growth (and YoY expansion is definitely expected). The key drivers comprise: 1) an increasing number of vehicles on the roads, fueled by the government’s first-time car buyer program (due to expire at the end of this year) and 2) a strong line-up of events at exhibition centers around Bangkok, such as Impact Muang Thong Thani, Bitec Bangna.
Domestic new car sales jumped 60% YoY to 1.14m units during 10M12. In addition, newly registered cars during 10M12 stood at 478,989 units, which has already exceeded newly registered car numbers of 413,508 units for FY11. Note that new car registrations lag sales because supply can’t keep up with demand (exacerbated by the first-time car buyer tax rebate). Given expectations of strong traffic numbers for December, we think BECL will post hefty traffic growth and earnings, both YoY and QoQ, for 4Q12.