BTS Group Holdings
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7.2% dividend yield BUY
BTS Group Holdings Plc (BTS)
- 4Q14/15 profit drops from extraordinary expense
BTS's 4Q14/15 (January-March 2015) net profit was reported at B679m, falling 31%qoq as a result of a provision for B200m expense from VGI (versus total extraordinary profit of over B400m in 3Q14/15). Excluding extraordinary items, 4Q14/15 normalized profit made the year's peak at B804m, jumping 65%qoq. Although income from VGI (41% of total income) fell by 23%qoq after the modern trade contract was terminated, it made up only 2-4% of total net profit, and its profit margin was low. Also, income from other businesses grew by 8.3%qoq and SG&A decreased, thus raising normalized profit margin to the year's peak of 53.6% and compensating for lower income. Overall, BTS's FY2014/15 normalized profit was 5% beyond our projection.
- FY2015/16 normalized profit to drop slightly, excluding B2bn extraordinary profit
FY2015/16 earnings are projected to be strong. In 1Q15/16 (April-June 2015), BTS would recognize extraordinary profit of around B2-2.5bn from sales of assets in exchange of 35.64% shares in NPARK; this is accounting profit, so it is not included in our earnings forecast and fair value. FY2015/16 normalized profit is expected to slip by 3%yoy because overall income is projected to fell 9%. Income from the advertisement business would weaken since effect from termination of the modern trade contract would be booked for a full year, and income from the property business would drop after accelerating transfers of condominiums in the previous two years. The joint venture with SIRI would begin its commercial run in 1Q15 and start generating income from 2017. Net profit would become more volatile from 3Q14/15 due to fluctuating profit/loss from sales of investment since the company has increased the proportion of its investment in equity to 29.6% of total investment budget of B26bn (cash flow + short-term investment + long-term investment).
- 7.2% dividend yield in FY2015/16, 3.2% in 2H14/15.
BTS is the most attractive land transportation stock amidst the current situation. FY2015/16 dividend yield is 7.2%. BTS will pay 2H14/15 dividend at B0.3/share (3.2% dividend yield). XD date is July 31, and dividend will be paid at August 17. We recommend BUY.
