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

[Foreign Language]

Thanks, [indiscernible]. Good morning, everybody. Welcome to the second quarter BTS Group earnings presentation. As usual, we start rolling through the presentation with BTS Group. And before we get into the routine numbers, let us brag a little bit about some of the sustainability achievements that we've received recently. Last week, BTS Group was announced, once again, as an included constituent member of the DJSI Emerging Markets Index and this year was actually named as the #1 company in the world in the transportation and transportation infrastructure sector. Also including -- following that, we were also including in the Thailand Sustainability Investment Index. Now this is the second year running that we'd be included in that. So just once again, emphasizing that sustainability really is something which is of crucial importance to BTS Group. Now moving into the segmental and -- not the segmental, the P&L highlights for the quarter. Three things, P&L, balance sheet and cash flow. P&L, we see some characteristics of our profitability resilience. It's obviously -- you have more perspective of other companies across the world and how their earnings are trending. But you see our operating revenue down 17% year-on-year to THB 8.9 billion. Recurring EBITDA, down 18% year-on-year to THB 2 billion, and net profit down 30% year-on-year to THB 765 million. So actually, in the face of quite resilient performance compared to other sectors, and we'll get into the details of that later. On the balance sheet side, again, it still remains fairly strong. And we have ample liquidity with cash and liquid investments of THB 16.7 billion. Our leverage is at around 1.13 net D/E at the moment. Cash flow, no change really. Most of what we're seeing is an uptick really in the leverage, which is an ongoing consequence of the new projects, and those are being invested primarily in Mass Transit projects. Over on to the next slide, the 2Q 2021 overview. Operating revenue for the quarter, THB 8.9 billion, down 17% year-on-year from THB 10.7 billion. You'll see in the bottom right-hand quarter where there's -- that reduction has come from, around THB 500 million from the Mass Transit segment, THB 350 million from the Property and THB 300 million from the Services sector. Actually, the reduction in the Mass Transit has nothing to do with COVID, and it's actually related to the slowdown of the Green Line development. So that 17% performance, again, showing its resilience in terms of COVID impact. Total operating -- total revenue, 11% down, a similar level of performance and going down to a recurring EBITDA of THB 2 billion, down 18% on year-on-year. That's already factoring in the share of investment from associates and joint ventures. Q-on-Q, you can see it's a different story. You can see the pace of recovery really. So recurring EBITDA, 32% up year-on-year. On the net profit level, that's taking net income as approximately THB 765 million for the quarter, down 40% year-on-year, but up 73% Q-on-Q. So we're starting to see the turnaround in our various subsegments, and we'll see that in the segmental analysis. The margin analysis, just as usual, represents more of the proportion of each business contribution rather than any kind of underlying trend in costs. At the end of the quarter, the Mass Transit contribution, 89%, with Media at 8% of operating revenue. For the 6 months cash flow, starting cash, THB 3.2 billion; ending cash, THB 4.3 billion. So a slight increase there. Once again, our CFO is shown is quite a high negative number, THB 8.8 billion. But within there, you'll see in the notes that we have a THB 4.4 billion investment for the Pink and Yellow lines, THB 1.4 billion of E&M and train procurement for the Green Line extensions, which are included in CFO, thereby sort of making that number exaggerated. On the CFI level, even though we have been investing, you can see primarily Pink and Yellow lines, THB 5.7 billion, THB 1.9 billion in U-Tapao as well as the motorway projects. There's actually a source of cash of THB 3 billion because we liquidate what we -- we liquidate both the sale of land, the Bayswater land, as well as some investments in financial assets of about THB 5 billion each. Cash flow from financing, a source of cash, THB 6.9 billion or THB 7 billion, again, mainly an uptick in long-term loans, THB 10.6 billion in long-term loans and also short-term loans of THB 2.4 billion, and that was offset by the dividend payment earlier this year of THB 3.9 million as well as some of the repayment of our long-term debentures in September of this year. So that ends the overall performance and the segmental performance. Over to [indiscernible]

Thank you, Daniel, and good morning, everyone. As usual, for segmental performance, we will begin with the Mass Transit business on Page 8. The company recorded total Mass Transit revenue in the second quarter of fiscal year 2020, Slide 21, of THB 7,946 million, decreasing by 7% or THB 566 million year-on-year from lower recognition of services income from the provision of E&M works and the train procurement service for Green Line extension, which declined by THB 2.3 billion year-on-year to THB 0.8 billion in this quarter as we enter the tail end-stage of the development. However, the decrease was partly offset with higher construction revenue for the Pink and Yellow lines of THB 1.2 billion year-on-year to THB 5.6 billion as well as higher O&M revenue of 50% or increasing by THB 434 million year-on-year to THB 1.3 billion. The increase in O&M revenue was mainly from the opening of another 8 stations of the Northern Green Line extension. On the cost side, Mass Transit costs decreased by 11% or THB 858 million to THB 6,739 million from lower recognition of services costs for the provision of E&M works and return to main service for the [ sequela ] extension. Mass Transit interest income in this quarter increased by 86% or THB 305 million year-on-year to THB 660 million, largely from interest income from receivables related to the development of new lines. And recurring EBITDA for Mass Transit business in this quarter -- recurring EBITDA margin for Mass Transit business in this quarter stood at 24.5% from 19.3% in the previous year due to higher O&M recognition as well as higher Mass Transit-related interest income. And in this quarter, we recognized share of profit from investment in BTSGIF of THB 108 million, declining by 59% or THB 157 million year-on-year following the impact from COVID-19 pandemic. Now moving on to the Media business. Media business in this quarter posted a revenue of THB 710 million, an increase of 61% Q-on-Q, but decreasing by 56% year-on-year. And the year-on-year decrease was mainly from the impact of the COVID-19 pandemic as well as the deconsolidation of MACO. For the Out-of-Home Media business, in this quarter contributed 67% of total Media revenue or THB 479 million, rebounding significantly by 81% Q-on-Q, but decreasing by 52% year-on-year. This was mainly due to the economic challenges, which led to the lower demand for advertising and marketing campaigns. While another 33% of total Media revenue was from digital services revenue, or THB 231 million, increasing by 31% Q-on-Q, but decreasing by 61% year-on-year. For the Mass Transit cost in this quarter, also decreased by 52% year-on-year or THB 409 million to THB 382 million in this quarter. Now moving on to the Property business. In this quarter, we recognized property operating revenue of THB 45 million, decreasing by 55% year-on-year, chiefly from lower commercial revenues. And Property costs also declined by 30% or THB 30 million to THB 70 million. And in this second quarter of FY 2020/21, the company recognized share of loss from investment in U City of THB 268 million compared to a share of loss of THB 7 million in the previous year, mainly due to the decrease in revenue from hotel operations resulting from the impact of the COVID-19 pandemic. Now let's take a look at the financial position as of 30th of September 2020. Total assets stood at THB 186 billion, increasing by 7.4% or THB 13 billion from 31st of March 2020, and the increase was largely from an increase in other financial assets and right-of-use assets of THB 22 billion from the adoption of TFRS 9; an increase in receivables related to Mass Transit of THB 17.6 billion; an increase in investment in joint ventures of THB 1.9 billion, chiefly from investment in U-Tapao International Aviation Company Limited, BGSR 6 Co., Ltd. and BGSR 81 Co., Ltd. as well as an increase in cash and cash equivalents of THB 1.1 billion. But the increase was partially offset by a reduction in current investments, investments in derivative instruments and other long-term investments of THB 20.7 billion from the adoption of TFRS 9 as well as a decrease in trade and other receivables of THB 5.8 billion, mainly from receiving the large installment from the sale of Bayswater land. For total liabilities, as of 30th of September, stood at THB 123 billion, increasing by 16% or THB 17 billion, mainly from an increase in long-term loans from financial institutions of THB 10.5 billion, largely from the drawdown of syndicated loans in relation to the Pink and Yellow lines, an increase in other financial liabilities and lease liabilities of THB 7.4 billion from the adoption of TFRS 9 and 16 as well as an increase in short-term loans from financial institutions, and those of exchange payables of THB 2.5 billion, partly offset by a decrease in long-term debentures of THB 3.5 billion, mainly from the partial repayment of the THB 9.5 billion debenture issued by BTS Group. And the total equity stood at THB 63 billion, decreasing by 6.4% or THB 4.3 billion, mainly from a decrease in retail earnings of THB 3.4 billion, mainly from the special dividend payment in May and August 2020 as well as other components of shareholders' equity of THB 1 billion. And our adjusted net debt-to-equity as of 30th of September stood at 1.31x, which derived from adjusted net debt of THB 82 billion. And next I will hand over to [indiscernible] for business update.

Thank you. For business update, let me start with the fiscal update. On the 6th of November, the company issued a second series of Green Bond, amounting to THB 8.6 billion. The Green Bond was rated A with negative outlook by TRIS Rating. And the bond was issued in 5 tranches with an average coupon rate of 2.72%. The proceeds from the issuance will be used for investment and debt repayment of the eligible Green projects, which are the Pink and Yellow lines. And next, the company has acquired 100% shares of Mo Chit Land Company Limited from Sino-Thai Engineering & Construction with a total purchase price of THB 4.5 billion. After the acquisition, BTS Group will invest in Mo Chit Complex Project, which is a mixed-use building in the amount of approximately THB 9.9 billion. This building is aimed to be the new headquarter, which will accommodate the ongoing expansion of the group company. The project is expected to complete in 2024. Next on Mass Transit and transportation update. In December next -- in December this year, or next month, we will commence full services of the remaining 9 stations of the Northern Green Line extension, which is from Phahon Yothin [ 59 ] station to Khu Khot station. First, our Green Line will cover a total of 66.7 kilometers and 59 station by the end of this year. Moreover, the Gold Line Phase 1 is also targeted to begin commercial operation in December 2020 as well. For the Pink and Yellow lines, the driverless monorail trains already arrived in Thailand since October. This means that we are ready to serve the partial operation of the Pink and Yellow lines, which are targeted in October next year. The constructions of both line is well underway around 67% competed. Besides on 9th of November, our consultant, BSR Joint Venture with BTS Group and BTSC being shareholders, have submitted a bit for the Orange line. So this is the Mass Transit and transportation project update. Please move on to [indiscernible] for Media update.

Thank you, [indiscernible]. For VGI key business update in this quarter, I would like to separate into 4 parts. First, our advertising business. Recently, VGI team up with Minere Thailand to launch a campaign which integrated Out-of-Home Media with AR technology. Together, we are not building only [ over net ] but also engagement with BTS passengers by using QR code scanning to receive a coupon discount off mineral water. This lead consumers to real purchasings and allow us to meet advertiser needs. Second, our payment business, starting with Rabbit LINE Pay, who has partnered with TravelGo.com, the leading Chinese online travel booking platform. This partnership allow us to provide convenient online booking service with Rabbit LINE Pay, which is now available for domestic flight and bus features, while the hotel booking feature is expected to launch within the first quarter of our next fiscal year. Next, update on Rabbit group users. All in all, we can say that we still continue to experience strong user growth, with 13.6 million Rabbit Card and 7.9 million Rabbit LINE Pay users. Last but not least, for payment business, it is fully my pleasure to announce that our Rabbit Card received Superbrands award from Superbrands Thailand. This award reaffirm that our brand is able to penetrate into the consumptions of people daily lifestyle and able to drive the country towards cashless society. Third, our logistics business. On August of 25th this year, Kerry Express has submitted the first half of filing to SEC for an initial public offering for 300 million ordinary shares at a par value of THB 0.50. Later on November of 13 this year, Kerry has submitted the final revisions of filing deposit by SEC after the submission is to consider for approval within 45 days. For VGI side, after the IPO, VGI will dilute its shareholding in Kerry Express from 23% to 19%, and think VGI will maintain [ THB 1 ] fee in Kerry Express. The company will still remain its investment in Kerry Express as an associate. The last update from VGI, which is on the social responsibility. In this quarter, VGI partnered with Pomelo, the Southeast Asia leading omnichannel fashion platform, in order to promote environmental sustainability through Trash to Treasure project. The purpose of this project is to upcycle vinyl from VGI used billboard and then repurpose it to use as Pomelo packaging. This collaboration, in return, help VGI to reduce its vinyl waste by 3.5 tons, while Pomelo is able to cut back more than 200,000 pieces of single-use packaging. That's all for VGI second quarter business update. Next, I would like to pass to [indiscernible] to update on the Property business. Thank you.

For U City development in this quarter, the global hotel industry continued to struggle with the effect of COVID-19. Low occupancy rate continued to lessen revenue and profitability. As you can see, our occupancy dropped year-on-year. However, this quarter has shown sign of recovery from the increase of occupancy quarter-on-quarter. This is due to the hotel reopening. U City also converted 4 hotels in Bangkok to affordable long-term accommodation to continue generating revenue. In the meantime, we diversify into increasing recurring revenue. U City purchased various commercial unit buildings in Bangkok with secure long-term rent. Now for the hotel status update, 53 hotels has been reopened and the remaining 4 are expected to reopen by the end of this year and the beginning of next year. For the next -- for the future pipeline project. VERSO International School has opened on 17th August 2020 for its first semester with almost 200 student starting from pre-K to Grade 9. The construction of Phase 2 is progressing as planned. The restoration of the Customs House or Roi Chak Sam project is progressing, with the expected completion in 2025. And last, the Unicorn Phayathai is progressing as planned with 22.9% completion and expected to complete around the second quarter of 2022. Next, we will move on to BTSGIF.

Thank you. Good morning, everybody. Today, I will present the financial performance of BTSGIF for the second quarter of fiscal year 2020, Slide 21. BTSGIF performance enhanced from prior quarter through the gradual increase in ridership from a relief and well-controlled COVID-10 pandemic situation. In the second quarter, total income of the fund was THB 737 million, down 45% year-on-year but up 4.1x Q-on-Q. The income from investment in net [indiscernible] was THB 736 million, down 45% year-on-year, mainly from the impact of COVID-19 outbreak, but up 4.2x Q-on-Q, mainly from the relief of COVID-19 situation from the previous quarter. Total expenses [ after the ] THB 19.6 million, down 28% year-on-year and 3% Q-on-Q. Year-on-year decrease was mainly from no incentive fee and no book-closure expense for distribution to unit holder as there was no distribution to unit holder in the previous quarter. Net investment income was THB 718 million, down 46% year-on-year but up 4.8x Q-on-Q. In this quarter, the total recorded loss on valuation of investment of THB 27 million from the devaluation in the fair value of investment in NRTA of THB 10 million and the recognition of investment cost for Suksa Wittaya station of THB 17 million. Changes in net asset resulting from operation was THB 691 million. For the first half of this year, total income of the fund was THB 881 million, down 66% year-on-year from the decrease in income from investment in NRTA. Total expenses of the fund were THB 40 million, down 21% year-on-year, mainly from no incentive fees, no Annual General Meeting expense and lower fund management fee. Net investment income was THB 841 million, down 66% year-on-year. The fund recorded gain on investment of THB 736 million from the increase in the fair value of investment in NRTA of THB 800 million and recognition of investment for Suksa Wittaya station of THB 64 million. Changes in net asset from operation were THB 1.6 billion. Next is income from investment in NRTA. In the second quarter, farebox revenue was THB 1.14 billion, decreasing 38% year-on-year but increasing 107% Q-on-Q. Year-on-year decrease came from: first, the decline in ridership for the impact of the COVID-19 pandemic by 39% year-on-year to THB 38.7 million -- 38.7 million trips but was partially offset by the increase in average fare by 2.7% year-on-year from the removal of the discount on stored card to be the same fare as single-journey card since April this year. Q-on-Q increase came from the gradual recovery of ridership from the wake of COVID-10 pandemic by 109% Q-on-Q, but was partially offset by the decline in average fare by 1.2% Q-on-Q. O&M cost were THB 406 million, decreasing 17.5% year-on-year and 1.3% Q-on-Q. Year-on-year decrease came from the reduction in CapEx. There was no major CapEx in this quarter, but there was rolling stock of THB 79 million last year. Second, admin and other expense was lower from lower-ticket expense and bank charges. Third, utilities expense from less electricity consumption and lower unit cost, but was partially offset by higher employee expense for bonus payment, which was postponed from the previous quarter. Q-on-Q decrease was led by: first, lower CapEx as the was AFC system update of THB 33 million last quarter, but was especially offset by higher employee expense from bonus payment. Income from investment in NRTA was THB 737 million, down 45% year-on-year but up 4.2x Q-on-Q. For the first half of this year, farebox revenue was THB 1.7 million, decreasing 52% year-on-year as a result of the decrease in ridership by 54% from the impact of COVID-19 but was partially offset by the increase in average fare by 3.6% year-on-year from the removal of discount on stored value card. O&M cost were THB 818 million, decreasing 17.5% year-on-year, largely from the reduction in gross CapEx. There was AFC system upgrade of THB 33 million. This year, there was a rolling stock of THB 137 million last year. Second, utility expense for reducing operating hours during the curfew period and lower ridership resulting in less electricity consumption. And third, lower employee expense from lower allocation costs from the opening of new Green Line extension. Income from investment in NRTA was THB 878 million, down 66% year-on-year. Next is the balance sheet of the fund. As of the 30th of September, total assets stood at THB 54.3 billion. The main component were investment in NRTA of THB 53.2 billion, decreased by THB 10 million from the previous quarter; investment in security and cash of THB 1 billion; and other asset of THB 95 million. Net asset value was THB 54.2 billion, equivalent to THB 9.3698 per unit. Next is the core network performance. In the second quarter, ridership was 38.7 million trips, down 39.5% year-on-year, representing 60.5% of ridership last year, primarily resulting from the impact of COVID-19 situation. Compared with the previous quarter, ridership significantly escalate by 109% Q-on-Q from the relief of COVID-19 pandemic during this quarter. Average retail ridership in the second quarter was 498,000 trip, down 35% year-on-year but up 98% Q-on-Q. Ridership was gradually rebounding during this quarter. Comparing with the previous quarter, ridership in July was 56% and up to 60% in August and 65% in September. In September and October, ridership was 65% of the previous year, while average retail ridership was around 70% of the previous year. In October, ridership slightly decreased from September due to an emergency decree announced by the government to cause some retail station temporarily during 16 to 21st of October, at fewer retail and the semester portion of some educational institution. Average fare in the second quarter was THB 29.6 per trip, increasing 2.7% year-on-year from the removal of discount on stored value card. On the contrary, average fare decreased by 1.2% Q-on-Q. This is the distribution of the fund. The fund announced the capital return for the first half of this year of THB 0.134 per unit. Book closing date is on 30th of November and payment date is on 15th of December. For the business update of Suksa Wittaya station, this construction of Suksa Wittaya station, the progress of the construction work as of September 2020 was 58%, away from the revised plan by 15%. However, the construction progress as of beginning of November is around 68%. The delay was from the limited ARPU of SkyTrain track to do the loft and here we have continued as planned and other government entity work on the road at [ Suksa ] affecting the working area. However, we still expect the station to be able to submit around early 2021. That's all for BTSGIF. Thank you.