BTS Group Holdings

BTS Group Holdings Plc (BTS)

BTS posted an FY12/13 (April 2012-March 2013) net profit of Bt2,488m, up by 18% YoY. Stripping out a gain of Bt1,000m from sales of land, revenue from court-ordered compensation of Bt7m and an FX loss of Bt34m, FY12/13 core earnings would be Bt1,516m, up by 52% YoY. The result was in line with our estimate and the consensus.
Results highlights
The core profit growth drivers were as follow. First, higher ridership numbers (up by 12% YoY to 197m pax) and a greater average fare (up by 2% YoY to Bt24.82 in FY12/13). Second, a greater earnings contribution from VGI Global Media Plc (VGI). Third, a bigger profit contribution from the property unit. Fourth, lower interest expenses (down by 13% YoY).
VGI posted strong bottom-line growth of 227% YoY to Bt908m for FY12/13. The property business reported YoY earnings expansion, driven by greater condo unit transference and revenue recognition from Eastin Grand Hotel Sathorn (which opened in Oct 2012). In FY12/13, the firm transferred 198 condo units at Abstracts Phahonyothin Park (which started transferring in Dec 2012).
Outlook
Even though the earnings contributions of the media and property businesses are expected to rise both YoY and QoQ, BTS’s 1Q13/14 (April-June) core profit is expected to soften both YoY and QoQ, as the firm sold its net fair box revenue rights to BTSGIF in April 2013. In-store media billings will drive VGI’s bottom-line growth in 1Q13/14. Moreover, condo unit transference at both the Abtracts Phahonyothin Park and the Sukhumvit projects should continue to rise. We expect BTS to post earnings growth later in 2013/14, driven by dividend income from BTSGIF, in which BTS has a 33.33% stake.
What’s changed?
We maintain our FY13/14 core and net profit forecasts unchanged at Bt2,313m and Bt22,824m.
Recommendation
Despite anticipation of weaker core earnings, we expect BTS to post a strong YoY and QoQ bottom-line growth for 1Q13/14, driven by an extra gain from the sale of net fair box revenue. Moreover, the announcement of committed dividend payments for FY13/14-FY15/16 totaling not less than Bt21,000m (implying dividend yields of 6.1-8.2%) should trigger a stock re-rating. Over the long-term, there’s much more to the BTS growth story—new mass transit lines and the unlocking of value from property assets. The stock’s FY13/14 PEG ratio is an undemanding 0.9x, which represents a steep discount to the Asian mean of 1.6x.