BTS Group Holdings
Strong earnings growth profile with expected special dividend paymentBTS Group Holdings Plc (BTS)
The key messages at the analyst meeting last Friday reaffirmed our optimistic view of BTS's long-term growth prospects. Expectations of sustained strong earnings growth through 4Q12/13 together with sales of net farebox revenue to a planned Infrastructure Fund (IFF) will boost its share price further, we anticipate. Good prospects for all key businesses should support a core earnings CAGR of 28percent for FY12/13-14/15 (against 14percent for the broad SET). There may also be scope for upside to our FY13/14 bottom-line forecast from profit accretion from the IFF and further sales of land plots. Valuation-wise, BTS is undemanding—FY13/14 PEG of 0.9x and a PBV of 2.5x—steep discounts to the regional means of 2.8x and 4.0x, respectively.
Strong earnings growth momentum expected for 4Q12/13
Profit contributions from the media businesses are expected to be flattish QoQ, but the property unit should be a key growth driver in 4Q12/13 (Jan-March 2013), fueled by greater condo unit transference—145 units at Abstracts Phahonyothin Park are expected to transfer by March 2013—almost triple the number for 3Q12/13. Presales have improved further—from 65% in Sept 2012 to 73% in Dec 2012 and to almost 80% currently. Also, more condo units at Abstracts Sukhumvit 66/1 are expected to transfer during 4Q12/13, as presales rose to 84% in Dec 2012 (from 74% in Sept 2012).
Moreover, earnings at the mass transit business are expected to improve QoQ, driven by a fatter GPM with the normalization of personnel expenses. Note that ridership numbers in the Jan-March quarter are normally flat QoQ.
Fare increases to mitigate the effect of low seasonal demand
Management guides that the average fare will rise in 1Q13/14 (April-June 2013) by less than 10%. We think that the increase in average fare will mitigate the negative impact of low seasonal demand for mass transit. There could be scope for the upside to our FY13/14 earnings forecast if the average fare rise were to exceed our assumption of 5%. If the mean fare were to increase by 10%, our FY13/14 net profit forecast would expand by another 9percent from our current model.
A special dividend is very likely
Management guidance reaffirmed our view about the possibility of a special dividend payment. We have, therefore, conducted a scenario analysis for the expected dividend payment from BTS (see Figures 1-3). Our study indicates that if BTS received Bt50-60bn in proceeds from sales of net farebox revenue to the IFF and won the tenders to operate three new mass transit lines, the special dividend could range Bt0.65-1.56/share. In addition, if it won a fourth new mass transit line, the special dividend could range Bt0.14-0.60/share.