Bangkok Expressway
Q1 2013 earnings as expected; core profit growth ahead
Bangkok Expressway Plc (BECL)
In line with model
BECL posted a 1Q13 net profit of Bt3,324m, up by 661% YoY and 1,035% QoQ. Stripping out a gain on a fair value adjustment for an investment (the status of its stake in TTW changed) of Bt2,808m, core earnings would be Bt516m, up by 18% YoY and 79% QoQ. The result was in line with both our estimate and the consensus.
Results highlights
The drivers of the core profit growth were: 1) greater traffic numbers (average daily traffic volume [including NECL] rose 2% both YoY and QoQ to 1,123,082 trips), 2) profit-sharing from TTW (against none in 1Q12 and 4Q12; BECL started recognizing equity income on Feb 7), 3) greater profit-sharing from its investment in CK Power (Bt27m in 1Q13 up from Bt10m in 1Q12 and Bt2m in 4Q12), 4) lower SG&A expenses (the SG&A/sales ratio dipped to 21.1% from 21.8% in 1Q12 and 23.8% in 4Q12) and 5) a lower effective tax rate (to 19.8% from 28.3% in 4Q12).
Outlook
The second-quarter is normally low season for expressway usage, due to the concentration of public holidays during the period. The historical data show that BECL’s consolidated second-quarter traffic volume normally dips about 5% QoQ. However, 2Q13 core earnings are expected to expand both YoY and QoQ, driven by greater YoY traffic volume and equity income from TTW (both YoY and QoQ). BECL will recognize equity income from TTW for the full quarter in 2Q13 against only two months in 1Q13.
What’s changed?
While we maintain our FY13 core profit forecast of Bt2,224m unchanged, we have revised up our FY13 net earnings projection by 126% to Bt5,033m to reflect the extra gain booked in 1Q13. As such, our YE13 SOTP-based target price rises to Bt46.50 from Bt45.
Recommendation
In our view, the market has largely priced in expectations of strong earnings growth in 1Q13. We have, therefore, tactically adopted a neutral view toward the stock for the near-term. However, expectations of 2Q13 earnings expansion, the upcoming listing of CK Power Plc and a potential increase in toll fees in Sept 2013 should act as share price catalysts later in the year. We like BECL’s long-term earnings growth story. Valuation-wise, it currently trades at an FY13 PEG ratio of 0.7x, a little above the Thai Transport sector average of 0.6x.
