KGI Securities has maintained the “Outperform” rating on BTS Group Holdings Public Company Limited (BTS) with a FY21 target price of ฿13.50/share, believing the worst has already passed for BTS as the negative impact from the Covid-19 pandemic was reflected in the 1Q21 result.
BTS’s 1Q21 net profit was Bt443mn (-50.4% YoY, -87.4% QoQ). Excluding extra gain of Bt139mn, 1Q21 normalized profit was Bt305mn (-77.1% YoY, -77.3% QoQ). The company’s revenue structure can be broken down into Mass Transit 92%, Media 4%, Property 1% and Services 3%. The key highlights for the quarter were:
i) Mass Transit remained strong, while Media and Property looked worse. Despite a sharp drop in ridership on SkyTrain of 69% YoY, total Mass Transit revenue was Bt8.9bn, rising 36% YoY. This was driven by i) higher services revenue from provision of E&M work and train procurement for Northern Green Line extension of 107.6% YoY to Bt2.7bn, ii) higher construction revenue for Pink and Yellow Lines of 11.4% YoY to Bt4.9bn, and iii) higher O&M revenue of 39.1% YoY to Bt1.15bn, as a result of the opening of the first nine stations of Northern Green Line extension. Media and Property revenues weakened 68% YoY and 55% YoY, respectively, due to COVID-19.
ii) Rebound in ridership should be in line with our estimate. For 2Q21, KGI thinks that the outlook would improve with working people returning to work rather than working from home, while we earlier expected no return of students or tourists. BTS’s ridership has recovered to around 480k trips per day, in line with our estimate at around 400k trips per day. Hence, KGI maintains the forecast for a 20% YoY decline in ridership for FY21 (Figure 2-4).
iii) Update on Orange Line and U-Tapao projects. For the Orange Line, the bid is expected to be submitted in September 2020. The company will be aggressive against its competitors (~10 companies) as this project is viewed as the second backbone followed by its existing Green Line. For the U-Tapao project, the contract was signed on June 19. The company is waiting for Notice-to-proceed from the Royal Thai Navy. BTS foresees potential benefit for its subsidiary VGI (VGI.BK/VGI TB)*.
KGI believes BTS’s earnings hit bottom in 1Q21 due to the Covid-19 outbreak. Hence, KGI maintains our FY21-22 earnings projections. However, there is a risk from slower-than-expected economic recovery and political conflict.
Apart from KGI, KTB Securities (Thailand) (KTBST) has reiterated a “BUY” rating with a target price of ฿12.50/share, based on the SOTP method. At an analyst meeting yesterday (August 19), KTBST has a neutral view of the company’s guidance, which is in line with the forecast.
First, phase 1 of the U-Tapao project is set to begin constructing early 2022 with an estimated CAPEX of Bt31bn, of which BTS’s investment would be Bt11bn. Second, a renewal of the concession contract for the Green Line is expected to see concrete development in the next 1-2 weeks. Third, BTS will enter a bid for the mass rapid transit Orange Line. Last, its Pink Line and Yellow Line projects are expected to begin partial operations in October 2021 as scheduled.
KTBST thus maintains the FY21-22E core profit forecast at Bt3.2bn and Bt4.2bn. In the nearer term, KTBST estimates 2QFY21E core profit to improve QoQ on the back of 1) improving domestic ad expenditures, which should bode well for VGI’s ad business, 2) a continued growth in BTS’s O&M revenue, and 3) recovering core network’s ridership.