BTS Group Holding

BTS Group Holding Plc (BTS) 

 

BTS’s share price has slid 5% over the past three months, pricing in its weak 1HFY16 (losses at its property JV plus weak media unit). Though 2HFY16 is not much better (flat HoH but down YoY), we see short-term catalysts for share price in the progress of the Green Line extension and the upcoming interim dividend. Longer term, BTS will return to growth of 20% p.a. in FY2017-18 as its property JV begins to contribute profit, its media unit recovers and mass transit grows. Maintain BUY with mid-2016 SOTP PT of Bt12. 

 

ST catalyst #1: Progress on Green Line extension. Now that Deputy Prime Minister Wissanu has said there are no legal issues that would bar a transfer, BTS expects the MoU for the transfer of the North and South Green extension lines from MRTA to BMA to be signed in Dec 2015. Once under the BMA, the PPP Act is no longer an issue (this Act adds at least nine months to the process), and so progress on the Green Line extension will be faster than other projects. BTS expects to negotiate and sign the new O&M contracts for North and South Green extension lines in 1H16. The bidding/negotiations for Pink, Orange, Yellow, LRT, and Grey Lines are expected to wind up in 2016 and the Light Green Line in 2017. 

 

ST catalyst #2: Interim dividend in Jan 2016. Based on its committed dividend payment of at least Bt8bn (Bt0.67/share) in FY2016 (Apr 2016-Mar 2017), we expect BTS to announce a 1HFY16 DPS of Bt0.33 in Jan 2016 (or 3.6% dividend yield) and the rest as a final DPS in May-June 2016, based on its usual dividend timeline. 

 

Earnings: ST unexciting but better in FY2017-18. We expect earnings to remain unexciting in 2HFY16, flat HoH but down YoY, eroded by losses at its property JV and weak media unit. Earnings will then turn around to ~20% p.a. growth in FY2017-18, as its property JV begins to contribute profit, media unit recovers and mass transit grows.  

 

 Mass transit. BTS maintains its FY2016 targets: ridership growth of 4-6% (vs. +7% YTD) and fare rate growth of 2% (vs. +1.4% YTD). Ridership will grow further in tandem with economic growth and from feed-through from new extensions. The new Purple Line (Bang Yai-Tao Poon) will start up in Aug 2016 (2QFY17). The new Suksa Wittaya station for the current Green Line (between Surasak and Chong Nonsi station) will be operational in Oct 2017 (3QFY18) and this alone will add an estimated 10K trips/day (equivalent to 2% of BTS’s ridership).  

 

 Media: BTS expects media revenue to drop 26% YoY in FY2016 (vs -30% YoY in 1HFY16), mainly on the expiration/termination of modern trade contracts with Tesco and BIGC. BTS expects outlook to improve slightly in 2HFY16 and be even better in FY2017-18 in tandem with economic revival. 

 

 Property: In 9MFY16, BTS&SIRI JV launched three condominiums – Mo Chit, Prakanong, Ratchathewi (100% sold out), worth in all Bt11bn. It will launch more - Wongsawang, Phaholyothin, and a project in the CBD, worth Bt13bn - in 4QFY16. In FY2016, BTS estimates equity loss from this JV of Bt350mn (vs Bt170mn in 1HFY16). In FY2017-18, things will look much better with profit of at least Bt1.5bn from condo transfers in Dec 2016-Jul 2019 (3QFY17-2QFY20), based on its target net profit margin of 12%.  

 

ST catalyst: Extension progress, interim dividend