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Bangkok Expressway

Long holidays and political protests hit Dec 2013 traffic numbers

Bangkok Expressway Plc (BECL)

Investment thesis

The domestic economic slowdown and the prevailing political chaos may discourage expressway usage and generate negative sentiment toward BECL in the near-term. But we expect the stock price to regain momentum once the protests end. We like the firm's long-term profit growth story and there is scope for upside to our model from its investment in the Xayaburi hydropower project. BECL currently trades at an FY14 PER of 9.3x, discounts to its long-term average of 9.7x and to the regional mean of 9.9x. Furthermore, its expected FY14 dividend yield of 6.1% is higher than the regional average of 5.7%.

Dec 2013 traffic dropped both YoY and MoM

BECL reported its expressway traffic numbers for December—average daily traffic volume (BECL+NECL) totaled 1.03m trips (0.96m trips for BECL and 67,790 trips for NECL). Traffic in December last year weakened by 5.3% YoY and 7.6% MoM. The decline in traffic (by an average of 2.2% MoM in Dec) was due to: 1) a long holiday in the run-up to New Year and 2) the political confrontation (the whistle-blowing protests started on October 31, 2013 but built critical mass in early December).

Note that BECL's traffic growth was 2.4% YoY during 10M13, then numbers started to fall in YoY terms in November, making for FY13 traffic growth of 1.4% YoY. However, average daily toll revenue in December rose 2.1% YoY (but slipped 7.6% MoM) to Bt21.8m. Fur FY13 as a whole, average daily toll revenue rose 4.3% YoY.

Core earnings growth still expected for 4Q13

Because of the weak traffic numbers in November and December 2013, BECL's 4Q13 average daily traffic dipped by 1.6% YoY and 2.2% QoQ to 1.08m trips. However, the firm's average daily toll revenue in 4Q13 rose by 6.0% YoY and 2.8% QoQ to Bt22.8m. We, therefore, expect BECL to post YoY and QoQ core earnings growth for 4Q13.

January 2014 traffic numbers likely to weaken further

We expect BECL's traffic numbers for January 2014 to weaken further, both YoY and MoM, because: 1) the month is normally a period of seasonally low expressway usage (average daily traffic in Jan normally softens about 1.7% MoM), 2) the domestic economic slowdown and 3) the ongoing political chaos, which will discourage driving. Our analysis indicates that BECL's traffic numbers are negatively affected by domestic economic weakness (the GDP multiplier for BECL's traffic growth is 0.9x) and political confrontation. However, the historical record indicates that its traffic numbers rebound strongly once political confrontation eases.




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