FRIDAY, March 29, 2024
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BTS

BTS

1QFY17: Extra items pull 1QFY17 above estimates BUY

BTS Group Holding Plc (BTS)

1QFY17: Extra items pull 1QFY17 above estimates 
 
1QFY17 (Apr-Jun 2016) net profit was Bt548mn (Bt0.05/sh), -82% YoY but +917% QoQ, well above our estimate of Bt450mn from extra gains (after tax) of Bt193mn (from the change of status in investment in MACO and on sale of investment). Core profit in 1QFY17 was Bt355mn, -20% YoY and -24% QoQ, with high SG&A (+35% YoY) bringing the miss. The earnings drop reflected a jump in SG&A expenses and weak media and property units that overwhelmed the robust mass transit unit. 1QFY17 core profit accounts for 18% of our full year forecast (vs 22% five-year average). 
 
1QFY17 highlights: 
 
- Profit breakdown. Of revenue, 43% came from mass transit, 35% from media, 9% from property, and 13% from services. Of gross profit, 49% came from mass transit, 42% from media, 6% from property and 3% from services. 
 
- Mass transit. Revenue was Bt671mn, +6% YoY. This comprised service income from train O&M and share of profit from BTSGIF (33% holding, booked as equity income). Revenue from its O&M contract rose 6% YoY to Bt417mn off higher fees from Green Line extensions. Contribution from BTSGIF rose to Bt254mn, +5% YoY, from a rise in ridership (+1% YoY) and average fare (+5% YoY to Bt28.1/trip) after an adjustment in monthly card promotions in July 2015 and discontinuation of discount to stored value Rabbit cards in Jan. Gross margin was 67.3%, flat YoY.
 
- Media. Revenue was Bt541mn, flat YoY. The absence of the modern trade revenue
 
(Bt51mn in 1QFY16) after contracts with BIGC expired in May 2015 was offset by greater revenue from outdoor media after it raised its holding in MACO to 37%, which also allowed it to consolidate MACO earnings, plus an increase in office building and other media revenue to Bt120mn (+129% YoY) brought by adding more office building contracts. A lower contribution from low-margin modern trade widened gross margin to 70% (vs. 67% in 4QFY15).  
 
- Property. Revenue was Bt142mn, -39% YoY on: 1) a drop in residential revenue to Bt10mn (-86% YoY) from the divestment of Abstracts Phahonyothin Park to SIRI in Oct 2015; 2) a drop in commercial revenue to Bt132mn (-18% YoY) from the sale of Eastin Grand Sathorn Hotel to U City in Apr 2015. Gross margin dropped to 36% from 40% in 1QFY16. Under equity income, BTS recorded: 1) narrower loss from BTS&SIRI JV of Bt60mn (vs -Bt82mn in 1QFY16) and U City of Bt32mn (vs -Bt57mn in 1QFY16); 2) loss from Bayswater of Bt33mn (vs. no gain/loss recognition in 1QFY16). 
 
- SG&A/sales jumped to 33.5% (vs. 25.3% in 1QFY16) on higher expenses from consolidation of MACO and service units (more staff costs and marketing expenses related to Rabbit Internet Group and Bangkok Payment Solution projects).
 
Maintain BUY. The progress of new projects will be price catalysts. BTS expects to be awarded the Green line extensions in Dec 2016. After purchasing the proposal documents for Pink and Yellow Lines, BTS will submit the tender offers by Nov 7, with results known by 2017. More details will be provided after the meeting on August 11.

 

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