BTS posted a 4Q13 (Jan-March 2014) net profit of Bt412m, up 3% YoY but down 8% QoQ. Core earnings for the quarter were also Bt412m, down by 8% YoY and 8% QoQ. The result was 8% below our estimate and the consensus, due to higher-than-expected SG&A expenses.
The key factors behind the weaker core profit were: 1) lower contributions by the media and property units, 3) higher SG&A expenses and 4) a 13% QoQ drop in interest income. However, the mass transit business’s contribution increased and the effective tax rate normalized.
Total ridership during the quarter rose by 12% YoY and 6% QoQ to 57.1m trips, while the average fare increased by 7% YoY and 1% QoQ to Bt26.80/trip. In contrast, VGI’s net profit fell by 14% YoY and 39% QoQ to Bt193m—advertising receipts dropped across all media platforms. The property business reported YoY profit growth (but a QoQ decline). Another 53 condo units at Abstracts Phahonyothin Park transferred in 4Q13 (198 units in 4Q12 and 131 units in 3Q13). On the cost side, the SG&A/sales ratio shot up to 30.6% in 4Q13 from 19.4% in 4Q12 and 21.5% in 3Q13.
As the earnings contributions of the mass transit and property businesses are expected to decline (QoQ for mass transit and YoY for property), we expect the 1Q14 (April-June) core profit to fall both YoY and QoQ. However, VGI’s profit should strengthen YoY and QoQ—driven by a surge in FIFA World Cup-related advertising—which would mitigate the earnings slippage to some extent.
We maintain our FY14/15 net earnings forecast of Bt2,567m unchanged.
BTS’s YTD share price underperformance was caused by delays to the opening of tenders to manage new mass transit lines and weaker numbers at its media and property units. We think the under-performance will persist in the near-term, due to the fact that it is currently low season for mass transit. But that presents an opportunity to accumulate the stock ahead of July-Dec high season.
BTS is cheap—an end-March 2015 PBV of 1.5x, 0.3SD below its long-term mean of 2.1x. The firm announced an FY13 DPS of Bt0.60, implying a 55% payout and a 7.5% annualized dividend yield. Note that BTS already paid an interim dividend of Bt0.39, so the remaining DPS would be Bt0.21. The XD date is June 5; payment on August 6. Note that committed dividend payments for FY14-15 (implying yields ranging 8.7-9.9%) will support the stock price going forward.