BTS Group Holding

BTS Group Holding Plc 

 

1QFY16 (Apr-Jun 2015) net profit of Bt3bn (Bt0.25/sh), +364% YoY and +346% QoQ, above SCBS and consensus estimates of Bt2.8bn from a Bt2.5bn extra gain (after tax) from the sale of its assets to U City. Excluding extra items gives a core profit of Bt432mn, -24% YoY and -29% QoQ, below estimates of Bt500mn from losses at its JV investment. The drop was due to weaker media and property units, higher SG&A (+16% YoY), and larger loss from its JV investment (-Bt87mn in 1QFY16 vs. -Bt3mn in 1QFY15).  

1QFY16 highlights:  

- Profit breakdown. Of revenue, 39% came from mass transit, 35% from media, 15% from property, and 11% from services. Of gross profit, 44% came from mass transit, 41% from media, 11% from property and 4% from services.  

- Mass transit. Revenue was Bt603mn, +11% YoY. This comprised service income from train O&M and share of profit from BTSGIF (33% holding). Revenue from its O&M contract rose 4% YoY to Bt394mn off higher fees from Green Line extensions (Sukhumvit and Silom). Contribution from BTSGIF rose to Bt208mn, +25% YoY, from: 1) a 9% YoY rise in ridership that offset a 0.7% YoY slip in average fare to Bt26.9/trip; 2) a revision of amortization of fund set-up costs. With unchanged costs and better revenue, gross margin widened to 65.4% from 61.7% in 1QFY15. 

- Media (stake in VGI upped to 73% from 70%). Revenue was Bt754mn, -28% YoY, from a fall in modern trade revenue to Bt51mn (-82% YoY) after the expiration and termination of contracts with Tesco in early 2015 and BIGC in May 2015. This was unable to be offset by: 1) the rise in revenue from BTS media to Bt436mn (+2% YoY) from better occupancy rate; 2) the rise in revenue from office building media to Bt52mn (+32% YoY) from more office building contracts and price hike since Oct 2014. The lower contribution from low-margin modern trade widened gross margin to 67.1% (vs. 58.8% in 1QFY15).   

- Property. Revenue was Bt233mn, -27% YoY on: 1) a fall in residential revenue to Bt73mn (-45% YoY) from fewer units transferred at 

Abstracts Phahonyothin Park (14 vs. 42 units in 1QFY15); 2) a drop in commercial business revenue to Bt160mn  (-14% YoY) from the disposal of Eastin Grand Sathorn Hotel to U City on 20 Apr 2015. The fall in revenue cut gross margin to 39.9% from 40.3% in 1QFY15. 

- Services. Revenue was Bt164mn, +30% YoY, notably on better revenue from 

Chefman restaurant of Bt82mn (+27% YoY) and Rabbit cards to Bt60mn (+24% YoY). Higher operating costs slimmed gross margin to 23.9% from 28.2% in 1QFY15.  

 

Maintain BUY. BTS expects the conclusion of the deal for the North and South Green extension lines soon. It expects bidding for the LRT and Pink Link to be delayed to 2016 from 2015. For its property JV, BTS and SIRI have raised the project value target for the five-year agreement to Bt100bn from Bt25-30bn. We like BTS for its high yield of 7% in FY2016, its new mass transit projects and new long-term property business plan. Its 1QFY16 core earnings accounted for 17% of our full-year forecast; we may revisit our projection as we provide an update after the meeting on Aug 14.