CMNT> BTS: Bualung recommends BUY, target price is Bt9.90/share BTS Group Holdings BTS TB / BTS.BK Sector: Transportation (Ground) Overweight Rating: BUY Target Price: Bt9.90 Price (25 July 2014): Bt8.70 Core profit to bottom out in 1Q14; recovery ahead Investment thesis Expected QoQ earnings growth in 2Q14, anticipation of that the timeframe for state infrastructure projects (including mass transit lines) may be moved forward and new government measures to boost consumption( which would favor BTSs media and property units) will catalyze the share price going forward, we believe. BTS is cheap-an end-March 2015 PBV of 1.9x, 0.3SD below its long-term mean of 2.1x. Moreover, the announcement of committed dividend payments for FY14-15 (implying dividend yields ranging 8.0-9.2%) will support the stock price. Core earnings contraction expected for 1Q14, squeezed by . We expect BTS to post a net profit for 1Q14 (April-June) of Bt479m, down 96% YoY but up 16% QoQ. The core profit is also estimated at Bt479m, down 7% both YoY and QoQ. The assumed YoY net profit dive was due to a 1Q13 extra gain from on the sale of future net fare box revenues. The factors behind the core earnings fall were: 1) a lower contribution by the mass transit business (QoQ), 2) a weaker contribution by the media operation (YoY) and 3) a smaller contribution by the property unit (both YoY and QoQ). .weaker contributions by all key businesses The April-June quarter is normally a period of low seasonal demand for mass transit use. Seasonality has been exacerbated by the fact that all Thai universities postponed the start of the first semester from June to August (in order to align with other countries in the AEC). As such, the 1Q14 ridership number rose only 2% YoY and dropped 10% QoQ to 51.3m trips. We assume that the average fare to increased 7% YoY (flat QoQ) to Bt27/trip. As such, the share of profit from the investment in BTSGIF probably rose YoY but declined QoQ. We also think O&M revenue grew YoY but softened QoQ. VGIs contribution is expected to have slipped YoY, due to the ad spend slump. However, it should have improved modestly QoQ, driven by a nascent recovery. Meanwhile, the property units bottom-line will probably report both YoY and QoQ declines on lower condo transference and hotel occupancy rate slippage. Forecast QoQ growth in 2Q14 core earnings BTSs 2Q14 core earnings (July-Sept) are expected to expand QoQ, driven by greater contributions from all key businesses. The July-Sept quarter is normally a period of high seasonal demand for mass transit use-ridership numbers typically rise about 9% QoQ. Also, VGIs contribution is likely to increase QoQ, driven by the ad spend recovery. Moreover, the property units profit contribution is projected to expand QoQ, driven by a higher hotel occupancy rate. However, we still expect the firms 2Q14 core profit to decline YoY, as the performances of the media and property units will be weaker. By Bualung Securities Public Company Limited on Jul 28, 2014 BUALUANG SECURITIES PUBLIC COMPANY LIMITED (BLS) is a subsidiary of BANGKOK BANK PUBLIC COMPANY LIMITED (BBL). This document is produced based upon sources believed to be reliable but their accuracy, completeness or correctness is not guaranteed. The statements or expressions of opinion herein were arrived at after due and careful consideration to use as information for investment. Expressions of opinion contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information shall be at the sole discretion and risk of the user. BUALUANG SECURITIES PUBLIC COMPANY LIMITED MAY BE IN RELATIONSHIP WITH THE SECURITIES IN THIS REPORT. Opinions, projections and other information contained in this report are based upon sources believed to be accurate including the draft prospectus, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents hereof. Bualuang Securities Public Company Limited may from time to time perform investment, advisory or other services for companies mentioned in this report, as well as dealing (as principal or otherwise) in, or otherwise being interested in, any securities mentioned herein, This report does not constitute a solicitation to buy or sell any securities. Investors should carefully read details in the prospectus before making investment decision. BUALUANG SECURITIES PUBLIC COMPANY LIMITED ACTS AS MARKET MAKER AND ISSUER OF DWs UNDERLYING STOCKS. Investors should carefully read the details of the derivative warrants in the prospectus before making investment decisions. (Please file information: blswarrant) BUALUANG SECURITIES PUBLIC COMPANY LIMITED IS OR MAY BE A UNDERWRITER/CO-UNDERWRITER/JOINT LEAD IN RESPECT OF THE INITIAL PUBLIC OFFERING (IPO) OF SECURITIES.
Posted on: Mon, 28 Jul 2014 08:05:03 +0000
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