BTS Group Holdings Public Company Limited (BTS) Earnings Call Transcript & Summary

[Foreign Language]

Hi. Good afternoon, everyone. Thank you for joining the first quarter results conference of both BTS Group and BTSGIF. We'll jump straight onto Page 4 of the presentation which gives the 3-month highlights. And I think given sort of the general perspective that these 3 months, April, May, June, are what I hope is the worst -- when we look back, would be the worst part of the pandemic in terms of the most highest restrictions on the movement of people but basically the trough. And we've seen earnings across, well, globally really hit hard during this period. I think in that context, that these results come across quite well, showing some good resilience. Starting on the left-hand side, you'll see operating revenue at THB 9.7 billion, actually increasing 16% year-on-year driven by the Mass Transit performance, which we'll come to later; recurring EBITDA, THB 1.5 billion; and net profit, THB 443 million. Whilst we've seen a decline versus the number year-on-year, we're at least positive for those numbers. And I think the resilience really of the results are due, as you can see, because almost 60% of the recurring EBITDA of the group -- of BTS Group is from both new lines of Mass Transit as well as O&M. These are unaffected by COVID. Moving on to the balance sheet. You see that the company actually has ample liquidity. Our cash and liquid investments, around THB 15 billion; and adjusted net D/E this quarter, about THB 1.15 billion. Actually, gross debt didn't increase at all compared to the last quarter, but that's from a reduction in the equity base. On the cash flow side, no change really. In terms of the investment, that's been invested in the Pink and the Yellow Lines mainly during that quarter. But also, we received some cash from the sale of land at Bayswater. So moving now to the first quarter overview on the P&L. You'll see there on the first line, THB 9.7 billion, up from THB 8.4 billion, a 16% increase in operating revenue. On the bottom right-hand corner, you see that is all from the Mass Transit division. In fact, it increased more than that, but it was offset by other businesses which were somewhat of a drag. That's reflected in the recurring EBITDA figure, which is now at this stage down 30% to THB 1.5 billion, again, dragged by the Property and the Media segments. Net loss, 440 -- sorry, net income, net profit, THB 443 million, down 50% year-on-year. Margins, generally weaker across the board, as you would expect in this situation. Operating revenue, the breakdown this quarter skewed much more heavily towards Mass Transit, 92%. We'll come to the details of that. On the next slide, you see the cash flow for the first quarter. Actually, the company saw an improved cash position over the quarter, starting at THB 3.2 billion and ending at THB 3.8 billion, up 19%. Cash flow from operations, a drain of around about THB 3.4 billion, although about THB 3.1 billion of that is investment cash flows. Cash flow from investing, you can see a source of cash, THB 6.5 billion. Again, the sale of land on Bayswater, where within this quarter we received THB 5.4 billion. But we also liquidated some of our sort of treasury and investment portfolio during the quarter, THB 4.6 billion, and then investing in both the Pink and Yellow Lines as well as some of the initial investment in U-Tapao Airport project. On the financing side, as you can see there, a drain of cash of THB 2.3 billion, that's predominantly the dividend payment of about THB 2 billion in May. As I mentioned earlier, financing cash flows, we were actually -- our gross debt actually declined during the quarter. So that left us with THB 3.8 billion of cash at the end of June. And including cash and liquid investments, that's a balance of about THB 15 billion. So now for the segmental performance, I'll hand over to Khun [ Jane ].

Thank you, Khun Daniel, and good afternoon, everyone. For segmental performance, we will begin with the Mass Transit business on Page 7. Total Mass Transit revenue during the first quarter of fiscal year 2020/'21 was THB 8.9 billion, increasing by 36% or THB 2.4 billion year-on-year, mainly from, first, higher services revenue for the provision of E&M works and train procurement service for Northern Green Line extension of THB 1.4 billion year-on-year to THB 2.7 billion; second, higher construction revenue for the Pink and Yellow Lines of THB 0.5 billion year-on-year to THB 4.9 billion; and third, an increase in O&M revenue of 39% or THB 323 million year-on-year to THB 1.2 billion, largely from the opening of the first 9 stations of the Northern Green Line extension from Ha Yaek Lat Prao station to Wat Phra Sri Mahathat station. As you can see from the pie chart on the top right-hand side, revenue from development of new lines, which is including services revenue for provision of E&M works and train procurement services for our new Green Line (sic) [ Northern Green Line ] extensions and construction revenue for the Pink and Yellow Lines contribute 85% of total Mass Transit revenue, following by 13% from O&M revenue. On the cost side, Mass Transit costs rose by THB 1.8 billion to THB 7.7 billion mainly from higher recognition of services costs for the provision of E&M works and train procurement service as well as an increase in construction costs for the Pink and Yellow Lines. Mass Transit-related interest income this quarter rose by 36% or THB 159 million year-on-year to THB 598 million largely as a result of interest income from receivables related to the provision of services for Northern Green Line extensions and the Pink and Yellow Lines. Mass Transit recurring EBITDA margin in this quarter increased from 19.2% in the previous year to 20.3% driven by improved procurements in the overall Mass Transit segment as well as higher Mass Transit-related interest income. And this quarter, we recognized the share of loss from investment in BTSGIF of THB 24 million compared to a share of profit of THB 225 million in the previous year following the COVID -- the impact from COVID-19 pandemic. Next is the Media performance. Our Media revenue in the first quarter of the new fiscal year was THB 441 million, decreasing by 68% year-on-year chiefly as a result of a significant impact from the COVID-19 pandemic as well as the deconsolidation of MACO. And in this quarter, Out of Home Media contributes 60% of total Media revenue or THB 265 million, a significant decrease of 71% or THB 663 million year-on-year mainly due to the aforesaid COVID-19 crisis, which led to a postponement of advertising spending. And another 40% of total Media revenue was from Digital Services segment or equivalent to THB 176 million, dropping by 60% year-on-year or THB 259 million, mainly from the deconsolidation of MACO. Media cost in this quarter dropped by 43% year-on-year or THB 225 million to THB 296 million. Now moving on to the Property business. Property operating revenue in this quarter was THB 35 million, decreasing by 55% or THB 44 million year-on-year chiefly from lower commercial revenue. And Property costs rose slightly by 2% year-on-year or THB 1 million to THB 75 million. And in this quarter, we recognized share of loss from investment in U City of THB 399 million compared to a share of profit of THB 193 million in the same period last year largely due to the decrease in revenue from hotel operations following the impact of COVID-19 pandemic. Now moving on the financial position. As of 30 of June 2020, total assets stood at 160 -- THB 176 billion, increasing by THB 2.7 billion or 2% from 31st of March 2020. The increase was mainly from an increase in other financial assets and right of use assets of THB 21 billion from the adoption of TFRS 9 and TFRS 16; an increase in receivables related to Mass Transit of THB 8.6 billion; as well as an increase in investment in joint venture of THB 1.2 billion, chiefly from an investment in U-Tapao International Aviation Company Limited partly offset with a decrease in current investments in derivative instruments and other long-term investments of THB 21 billion from the adoption of TFRS 9; as well as reduction in trade and other receivables of THB 5.6 billion mainly from receiving the remaining proceeds of the sale of Bayswater land. Total liabilities increased by 7% or THB 7 billion to stand at THB 113 billion from an increase in other financial liabilities and lease liabilities of THB 8 billion, from the adoption of TFRS 9 and 16; as well as an increase in long-term loans from financial institution of THB 5 billion, mainly from the drawdown of syndicated loans in relation to the Pink and Yellow Lines; and partially offset by a decrease in short-term loans and financial institutions and bill of exchange payables of THB 6.5 billion. Total equity was THB 63 billion, decreasing by THB 4.2 billion or 6% year-on-year, chiefly from a decrease in retained earnings of THB 2.3 billion largely partially due to the special dividend payment in May 2020; as well as a decrease in other components of shareholders' equity of THB 1.9 billion. As of June -- as of 30 of June 2020, our leverage position remain low with adjusted net debt to equity of 1.05x from adjusted net debt to equity of THB 72 billion. And next, I'll hand over to Khun Noppasorn to present on the COVID impact and business update.

Thank you, Khun Sataporn. On business updates, I would like to go directly to the impact from the COVID-19 pandemic first. Start with the Mass Transit. The ridership in the Core Network saw a downward trend since January. First quarter quarterly ridership declining by 69% year-on-year yet recovering month-over-month, as seen in July ridership, which is up 25% month-on-month. BTS Group risk exposure and financial impact within the Core Network, however, are limited as we hold on 1/3 of share in BTSGIF. Regarding the O&M business, we saw no impact from the crisis as we continue to operate the ground train services. Our O&M revenue increased 39% year-on-year to THB 1.1 billion in this quarter. To conclude, around 58% of the group recurring EBITDA is from the development of new lines and O&M business, which had no impact from the COVID. We continue to implement necessary measures to protect our BTS [ operators ], including encouraging passengers to wear a mask at all time while traveling on BTS. On Media part, VGI experiences a significant impact due to a reduction and delay in advertising spending. This mainly affects out-of-home advertising and off-line payments business. However, the impact was partially offset by online payments, thanks to higher online transaction and the logistic business from a surge in online shopping during the lockdown period. In addition, VGI tries to minimize its cost by negotiating with office building landlords to reduce rental fees and giving some promotions to remain customers. In this unprecedented situation, VGI's transformation strategy has proven that it is the right decision. With the diversified business portfolio, it has supported their performance during the crisis, and they strongly believe that VGI is well positioned to benefit from the [ lift-up ] once the crisis is over. In term of Property business. U City got had hard hit by the crisis especially in the hospitality business, which is U City main business. 53 out of 57 U City hotels were closed since March 2020, and around 80% just recently reopened in June. The crisis consequently hurt its financial performance at present and is expected to do so in the near future. However, the full impact cannot be [ felt ] at this stage. And U City is strictly implementing cost-saving measures to preserve its liquidity. Next, on Mass Transit and Transportation update. Beginning with our secure mass transit line, the left-hand side, recently, on 5th of June, we have opened another 4 stations of the Northern Green Line extension from Royal Forest Department station to Wat Phra Sri Mahathat station. We remain our expectation to fully operate the entire Northern Green Line extension in December this year. For the Pink and Yellow Line, constructions were underway with around 60% completing equally. And we expect to begin partial operation in October next year. Another one for our secure line, which is Gold Line Phase 1, the first batch of train are live in June. And the rest of 2 trains already come in last [ Saturday ]. So current our 3 APM trains from Bombardier will completely deliver to service passenger in October this year. Now moving on to the U-Tapao International Airport project update. Following the contract signing on the 19th of June, we just submitted the prelim master plan to EEC Office on 17 August, which is within 60 days from the contract signing. Then engineering team will proceed the on-site inspection in next month. After that, we will wait for NTP to kick off the construction, which is expected by early 2022. Next, on Intercity Motorway project. We expect the contract signing of 2 routes within this month. And last but not least, BTS Group together with BTSC have bought the Request for Proposal, or RFP, of the Orange Line. The submission is on 23rd of September. And the best bidder will be announced by December this year. So these are the Mass Transit and Transportation updates. So next, the Media update from Khun Nantarach.

Thank you, Khun Noppasorn. For Media segment update, I would like to separate to 3 parts, which are advertising; payment; and reward and achievement. Firstly, advertising business. VGI launched a new media package named [ welcome ] package campaign, which combined 3 LED screens, and each display simultaneously merge with one another at the entrance of BTS stations. This media package is a powerful tool for creating awareness and impact to deliver memorable impressions amongst the target customers. We have been roll out on 18 stations, and we have start commercialized in this August. Yes, for the video of the [ welcome ] package campaign, please kindly find attached link in the meeting chatbox. So for business -- for payment business, the company continued to expand Rabbit Card and Rabbit LINE Pay touch points to several transportation modes such as bus and boat; as well as widen its reach to cafeteria, in shopping malls and factories, resulted in the number of Rabbit Card increased by 16% year-on-year to 13.3 million card. And the number of Rabbit LINE Pay users are more than 7.7 million users, an increase of 28% year-on-year. And award and achievement. During the first quarter, VGI was recognized by its strategic transformation from a traditional out-of-home media company into an integrated O2O solutions provider with the ASEAN's Transformation Champions from Innosight, the leading growth strategy consulting company. In addition, VGI has maintained its status as the only media company within the SET50 Index of July to December 2020. For our next slide, let us update you about U City ongoing development projects. Start with VERSO International School, located at Thana City, Bang Na, the construction for Phase 1 is now 100% completed. Currently, we have almost 200 students, and the school already opened on the 17 August. For the Customs House or the Roi Chak Sam project, its restoration plan was already approved by the Fine Arts Department, and the construction is expected to complete in 5-year time. Moving to the Unicorn Phayathai project, the mixed use building and construction is underway with 18% completion. So the next slide. This slide shows the condominium project between U City and Noble, so-called the NUE Noble Ratchada – Lat Phrao, this project value is around THB 2 billion. And the construction is expected to start in February next year. So it's all about Media and Property business update. Next, I would like to pass to Khun Siriphen for BTSGIF update. Thank you.

Thank you, Khun Nantarach. Good afternoon, everybody. Today, I will present the financial performance of BTSGIF for the first quarter of fiscal year 2020/'21. The coronavirus effect over BTSGIF causing a reduction in ridership in the first quarter of this fiscal year. In the first quarter, total income down 88% year-on-year and 85% Q-on-Q, really from a decrease in income from investment in net farebox revenue, which dropped to THB 141 million. Total expenses of the fund were THB 20 million, down 13% year-on-year from lower fund management fee and expenses. However, total expenses lost by 2% Q-on-Q from annual advisory fee we impaired in the first quarter. Net investment income was THB 123 million, down 90% year-on-year and 87% Q-on-Q. In this quarter, the fund record net gain on valuation of investment of THB 763 million from the increase in fair value of investment in NRTA of THB 810 million, which were due to the projected net revenue in fiscal year 2020/'21 which is expected to gradually recover in the later month from the anticipating for a relief of COVID-19 situation, thus, the present value of the remaining cash will increase more than the absence of cash flow from the shortened period of the concession agreement but partially offset by the recognition of the investment cost for Suksa Wittaya Station of THB 47 million, which was record as an asset in balance sheet. Changes in net asset resulting from operation were THB 886 million. Next slide is the income from investment in NRTA. In the first quarter, farebox revenue was THB 553 million, declining 67% year-on-year and 62% Q-on-Q, resulting from the significant impact of COVID-19 since mid-January this year and the curfew announcement in April to mid of June this year. Thus, ridership in this quarter dropped by 69% year-on-year and 64% Q-on-Q to 18.5 million trips; and average fare loss by 3% year-on-year and 3.6% Q-on-Q mainly from the removal of the discount on stored value card to be the same for a single journey card. O&M costs were THB 412 million, decreasing 17% year-on-year and 14% Q-on-Q. Year-on-year, the case claim from, first, lower CapEx, which consists of automatic fare collection system upgrade of THB 33 million compared to rolling stock of THB 58 million last year. Second, lower employee expense as there was no [ Gold Line ] payment in this quarter. And third, lower utility expense from the decrease in operating hours during COVID period. Q-on-Q decrease was mainly due to, first, lower maintenance costs, as in the previous quarter, there were an external [ mileage existing contract ] as best innovation to set up the ticket vending machine; second, lower property insurance premium as normal payment is scheduled in the fourth quarter of every year; and third, lower utility expense from reducing operating hour during the curfew period. Income from investment in NRTA was THB 141 million, down 88% year-on-year and 85% Q-on-Q. Next slide is the balance sheet of the fund. As of 30 of June, total assets stood at THB 53.6 billion. The main component of investment in NRTA of THB 53.2 billion increased by THB 810 million from last quarter. Investment in security and cash was 30 -- THB 336 million. Net asset value was THB 53.5 billion, equal to THB 9.25 per unit. For the Core Network performance in the first quarter, ridership was 18.5 million trips, decreasing by 69% year-on-year and 63% Q-on-Q, resulting from the COVID-19 situation since late January this year and the curfew announcement in April to mid of June this year. During the first quarter, the government issued notification forcing temporarily closure of [ various ] business and request people cooperation to stay at home and work from home in order to control the spread of infection. In addition, the government issued a notification on public administration in emergency situation, which affect the operating hours of BTS SkyTrain. Average fare excluding extra event in the first quarter, was THB 29.9 per trip, increased 3% year-on-year and 3.6% Q-on-Q primarily from the removal of the discount on stored value card of THB 1, to be the same fare as single journey card effective from April this year. First ridership account for about 33% of total ridership. Average fare including extra event increased 5% year-on-year as there were free trip during the royal coronation ceremony last year. Average weekday ridership in the first quarter was 252,000 trip, down 67% year-on-year and 63% Q-on-Q. However, ridership in July and August rebound from the previous month and currently raised approximately 60% of the precedent level. For the distribution summary, as of 30 of June this year, the fund had deficit, thus, the fund is unable to pay a dividend to the unitholder in this quarter. However, the fund had cash from the operation during the first quarter of approximately THB 0.013 per unit. That's the fund we will not pay the distribution in the form of capital return in this quarter. However, such amount will be accumulated with the next payment. For the business update. Regarding the construction of Suksa Wittaya Station, the progress of the construction work as of June 2020 was 49%, delayed from the plan by 20%. The delay was from the utility relocation work due to the coordination with various parties and curfew at night, which reduced working hours at night. In relation, there is the relocation of elevator and stair and the accident that the train hit a worker on the railway. However, we still expect the station to be able to serve [ will allow ] early 2021. For Saphan Taksin station, the improvement of Taksin is pending for having the approval on EIA of this station improvement. And the improvement of station is pending for BMA consolidation on the station design. That's all for BTSGIF. Thank you.

Yes. And over to Q&A session.

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