BTS GROUP HOLDINGS

Good choice BUY

BTS Group Holdings

- 2Q14/15 profit close to 1Q14/15

2Q14/15 net profit was reported at B633bn, dropping 33%yoy mainly due to the

following factors: 1) Income from property business fell by B500m due to fewer

transferred units of Abstracts Phahonyothin Park. 2) B380m non-recurring profit from

land sale in 2Q13/14 was not booked in 2Q14/15. However, 2Q14/15 net profit

remained close to 1Q14/15. Excluding extraordinary items from sales of investment

(B84m in 1Q14/15, B22m in 2Q14/15), 2Q14/15 normalized profit grew by 8%qoq

from every business; profit from train operation, advertisement media, and property

businesses rose by 4%qoq and service revenue jumped by 15%qoq from Chef Man

Restaurant. In addition, share of profit from BTSGIF increased by 30%qoq to B50m

because of revision of amortization method for fund set-up cost from 3 years to the

end of concession. Operation expense stayed close to 1Q14/15.

- Maintain forecast, excluding B2.5-3bn extraordinary profit

We maintain our earnings forecast (1H14/15 profit made up 50% of earnings

forecast) 2H14/15 net profit is estimated close to 1H14/15. Profit is expected to peak

in 3Q14/15; advertisement media business would enter its high season, while profit

from other business is expected to stay flat. For property business, extraordinary

profit from land sales on joint venture with SIRI and NPARK is estimated at B2.5-3bn,

projected to be recognized in 4Q14/15 (ending March 2015); this would not be

included in our forecast until a clear conclusion is made.

- Good choice

With the current share price, this is a good entry point for BTS. It has an upside from

auctions for new skytrain extension lines; clarity of the auction would be made in

early 2015 (four extension lines have been included in our earnings forecast: south

Green Line (Bearing – Samut Prakan), north Green Line (Mochit – Koo Kot), Pink Line

(Kae Rai – Minburi), and Bangna – Suvarnabhumi Airport (LRT)). In addition, its

downside is limited by a share repurchase. With dividend yield of 5.7% in FY2014 and

6.5% in FY2015, we reiterate BUY.