Bangkok Expressway

Bangkok Expressway Plc (BECL)

Maintain BUY. After yesterday’s analyst meeting, we maintain BUY on the counter
with a new end-13 SOTP PT of Bt39 (from Bt35), after factoring in the purchase of
more TTW shares. Post transaction, its core earnings growth is more enticing with
two-year CAGR of 30%. Our PT consists of Bt19.3 for the existing expressway and Bt6.0
for the new expressway (DCF), Bt8.9 from TTW and Bt1.2 from BMCL (market price),
Bt3.6 from CK Power and Bt0.1 from Xayaburi (cost method). We also like BECL for its
upcoming catalysts: 1) potential gain/valuation re-rating from listing CK Power in Mar
2013 and 2) a probable toll rate hike (from Sep 2013) based on Feb 2013 inflation.

To acquire additional 11% stake in TTW. BECL plans to buy 11% more in TTW from
CK at Bt7.55/share (5% discount to TTW share price over the past 60 days) for a total of
Bt3.3bn. This will be confirmed at the EGM on 6 Feb 2013. Once approved, the process
should be complete within Feb 2013. The transaction will raise BECL’s stake in TTW to
20.24% from 9.24% now. It is funding the purchase with its internal cash flow, with
Bt2.2bn paid on transaction date and the rest to be gradually paid until April 2015.
BECL said it is bumping up its holding in TTW because of the attractive return on
investment (~6% cash return on dividend income from TTW vs. its existing 2-3% cash
return), using the cash left over after it has obtained funding for new expressway
projects (LT loans and debentures). This transaction raises our forecast earnings by
12% in 2013 and 15% in 2014 (equity income from TTW) and its valuation by +Bt4/share
(+10%).

Expect toll rate hike but minimal traffic growth in 2013. The most recent
inflation figures lead BECL to expect it to be granted permission to raise toll rates
(+Bt5/car), to take effect on 1 Sep 2013. It also expects to do well off the record-high
domestic auto sales in 2012-13, but still conservatively assumes minimal traffic growth
in 2013 off 2012’s high base (11M12 traffic growth at +6.3%). Company guidance is close
to SCBS expectations. We have already taken into account a +Bt5/car toll rate hike
from 1 Sep 2013, and assume traffic growth at +6% in 2012 and +1.5% in 2013.

Plan to list the CK Power in March 2013. BECL says that it plans to list CK Power in
March 2013 at the earliest. Currently, CK Power shareholders include CK (38%), BECL
(30% at the cost of Bt10/share), TTW (30%), and others (2%). We expect the potential
gain or valuation re-rating from listing CK Power to be another catalyst for BECL.