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BTS Group Holdings

Good prospects and scope earnings upside BUY (maintained) Target Price: Bt0.91 Price (16/02/12): Bt0.73

BTS Group Holdings Plc (BTS)

Investment thesis: The key messages from the analyst meeting reaffirmed our optimistic view with regard to BTS's mass transit and media businesses. Moreover, the firm's profit profile is resilient to a weakening global economy. Its FY11/12 core profit turnaround and impressive core earnings CAGR of 36percent for FY12-14, driven by substantial capacity expansion, should eventually support a share price re-rating. BTS's valuation is undemanding—an end-March 2012 PBV of only 1.0x, deeply discounted to BMCL's 7.9x and the regional average of 2.2x.

Earnings growth to be sustained through 4Q11/12: The profit driver through 4Q11/12 (Jan-Mar) will be the mass transit business—average weekday ridership bounced to 573,041 pax in Jan 2012 from 529,466 pax in 3Q11/12. In addition, the media operation should expand gradually—the release of pent-up demand (disrupted by flooding) will mean bigger billings, even though Jan is low season. The property unit should post steady numbers in the months ahead, driven by transference at Abstracts Sukhumvit 66/1 condo.

Transit & media to drive FY12/13 profit: Ridership is forecast to grow 15% YoY, driven by a full operational year for the On Nut-Bearing extension and the opening of the Wongwianyai-Bang Wa extension in Dec 2012. The media unit's revenue is forecast to jump 40% YoY, driven by both modern trade and BTS system advertising. With regard to the property business, the unsold units (37% of the project) at Abstracts Sukhumvit 66/1 are expected to be booked and transferred by Dec 2012, while presales at Phaholyothin Park should reach 70% by Dec and 15% of presales transferred by March 2013. But the opening of a new hotel at BTS Surasak station in June 2012 may squeeze the profitability of the property unit.

Effective monthly pass fare to rise: Earlier this month, BTS got approval for a 25% increase to the authorized fare to Bt18-56 per trip from Bt15-45 per trip. The effective monthly pass fare will rise by Bt1 per trip, starting March 2012. That should increase the average effective fare by 1.5% YoY. Our preliminary estimate indicates that FY12/13 (April 2012-March 2013) net profit would increase 3percent from our current projection of Bt1,240m. Note also that an effective fare increase is possible in FY12/13, but there isn't a clear timeline available yet.




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