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

[Foreign Language] Good afternoon, all analysts and fund managers. Welcome to BTS Group and BTSGIF First Q 2021/22 Analyst Meeting. [Operator Instructions] And before starting, you can download our presentation in BTS Group website at the Investor Relations menu and then click at the Webcast and Presentation. Today, as usual, we are honored to welcome our management team, start with Khun Surapong Laoha-Unya, CEO of BTSC.

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Khun Chi Keung Kong [indiscernible], Deputy CEO of BTS Group.

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Khun Surayut, CFO of BTS Group.

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Khun Daniel, Chief Investment Officer of BTS Group.

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And Khun Chawadee, Financial Controller of BTS Group.

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Moreover, our management from BTSGIF, Khun Siriphen, fund manager.

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Khun Soraya, CEO of U City.

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And lastly, IR team from BTS Group, [ Master Ad MACO ] and U City, [indiscernible].

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So I think it's good time to start. I hand over to Khun Daniel for the earnings presentation. Thank you.

Thank you, [indiscernible]. Nice to see you all. Welcome to another lockdown quarterly conference call, this time, first quarter '21-'22. I'm guessing we're probably still be in lockdown in the second quarter, but anyway, let's take that later. Starting off with the usual routine. First quarter highlights on the P&L. Once again, we're continuing with our resilient performance with total revenue down only 11% year-on-year at THB 9.5 billion. Recurring EBITDA and net profit showing significant year-on-year increases, so showing good momentum compared to year-on-year last year. On the balance sheet side, once again, same messages, cash and liquid investments, THB 20 billion, strong as before, actually increased 19% Q-on-Q, and leverage still remains quite low at 1.39x net debt to equity. For our cash flow side, again, you'll see a lot of financing cash flows in this quarter. And this quarter, they were allocated more once again to the development of new mass transit lines, but also some of our MATCH investments, in this case, in U City. Moving on to the 1 quarter overview in terms of P&L snapshot. Total revenue down 11% to THB 9.5 billion. Operating revenue was at THB 7.8 billion, so that's down 20% and that's excluding interest income, dividend income and nonrecurring items. The gross operating profit level, however, you'll see a substantial increase year-on-year following the rebound of Media business. At an EBITDA level, actually, we saw an even stronger performance of THB 2.3 billion EBITDA, up 52% year-on-year, and that's primarily driven by the share of income turnaround year-on-year, which moved from -- into a positive territory or less negative territory, rather. Recurring net profit, all strongly up year-on-year, 121% to THB 1 billion for recurring net profit and 200% to THB 1.38 billion for net profit after market interest, and that's mainly also supported by some nonrecurring sales of land. You see graphically in the bottom right-hand corner the operating revenue comparison, where the decline in operating revenue is from the decline in the MOVE revenue, as you'll see later, but supported by an increase in earnings in the MIX revenue. Margins improved across the board. Operating profit margin, EBITDA margin and net profit margin all up significantly, again, mainly from the lower contribution of the development cost of the rail, which is a low-margin business, bringing the operating revenue breakdown for the quarter at 90% for MOVE, 8% for MIX and 2% for MATCH. On to the cash flow snapshot. Again, broadly speaking, beginning cash and end of the year cash, you see a strengthening position from THB 3.8 billion to THB 7.4 billion. And again, most of those cash flow is dominated from the green column, which you can see is financing cash flows. Just running through a little bit, operating cash flow, minus THB 3.5 billion according to the financial statements, but that's -- that becomes a positive THB 860 million operating cash flow when you make the relative adjustments to the investment items that we routinely adjust for. On the investment cash flow side, you see a moderate level of net investment, purchase of investment in associates around about THB 5.9 billion, of which the largest item was the U City investment; acquisitions of financial assets, THB 4.5 billion; and investment in the Pink and Yellow Lines, third at THB 1.5 billion. And then that was offset by repayment of share loans from U City of THB 5 billion as well as sales of investments in subsidiaries that's a land-related one that we've shown there. On the financing cash flows, you see an increase in short-term loans from financial institutions and BEs at around THB 8.9 billion, an increase in the long-term loans financial institutions of THB 3.5 billion and some repayment of long-term debentures of THB 1 billion. So ending with a net cash position of THB 7.4 billion or including our liquid investments, around THB 19.5 billion. Now moving over to the segmental performance. I believe it's [indiscernible] [ Khun Jane ].

Thank you, Khun Daniel, and good afternoon, everyone. As we've shown for the segmental performance within the MOVE business, in this quarter, operating revenue of THB 6,976 million, declining by 22% from last year. The decrease was mainly from lower revenue from services revenue from provision of E&M works and train procurement service for the Green Line extension, which declined by THB 2.3 billion year-on-year to THB 0.4 billion in this quarter as we enter in the tail-end stage of development. However, the decrease was partly offset by an increase in O&M revenue of THB 404 million or 35% year-on-year to THB 1,557 million, largely driven by the full operation of the Northern Green Line extension in December 2020. In terms of the contribution, the bar chart on the bottom left MOVE financial is that 78% of total MOVE operating revenue was from development of new lines and followed by 20% from the O&M revenue. In terms of the cost, MOVE cost also decreased by 26% to THB 5,648 million in this quarter. Mass transit interest income increased by 31% to THB 784 million. And following the higher O&M recognition as well as higher mass transit interest income, more recurring EBITDA this quarter, rising by 15% to THB 2,074 million, and recurring EBITDA margin also improved from 20.3% in the previous year to 29.7% in this quarter. Next one, MIX business, having the operating revenue of THB 658 million, rising by 34% from last year, largely supported by the operating growth in both Out-of-Home advertising as well as the Digital Services business. As you can see here from the bar chart on the bottom left hand side, 57% of total MIX revenue was from Out-of-Home advertising or equivalent to THB 377 million, while another 43% was from Digital Services business or equal to THB 281 million, rising by 24% year-on-year. MIX cost also increased by 24% to THB 413 million, while recurring EBITDA of MIX business improved almost 4,000% to THB 163 million, largely driven by the improved operating performance of the MIX business as well as financial profit investment in associates on the MIX business. And the last business is the MATCH business, posting the operating revenue of THB 171 million, declining by 44% from last year, largely due to the lower recognition of the construction revenue from HHT Construction. And in this quarter, we recorded narrower share of loss from investment in U City of THB 39 million compared to a share of loss of THB 399 million in the previous year mainly as a result of a rebound in revenue from the reopening of the U City's overseas hotels as well as the gains from asset divestments and gain from exchange rate. And in this quarter, we also record a gain from sale of the 1 land plot in Thana City of THB 481 million. Moving on to the financial position as of 30th June 2021. Total assets stood at THB 225 billion, rising by 6% from 31st March 2021. This was mainly from an increase in receivables related to the rail mass transit projects of THB 7.1 billion and increase in investment in associates of THB 5.5 billion, mainly from increased investment in U City following the subscription to its price offering as well as an increase in cash and cash equivalents of THB 3.6 billion, primarily offset by a decrease in net long-term loans to related parties of THB 5 billion from the debt settlement of U City. Total liabilities as of 30th June stood at THB 149 billion, rising by 10% mainly from an increase in short-term loans from financial institutions and bills of exchange payables of THB 9 billion as well as an increase in net long-term loans from financial institutions of THB 3.5 billion from the drawdown of syndicated loans in relation to the Pink and Yellow Lines and partly offset with a decrease in net long-term debentures of THB 1 billion due to the repayment of the first tranche amounted to THB 1 billion of the THB 30 billion Green Bond issued in May 2019. Total equity remained stable at THB 36 billion from 31st March 2021, and on the leverage side, adjusted net debt equity stood at 1.39x from an adjusted net debt of THB 106 billion. Next, I'll hand over to Khun Pornprasert for business update.

Thank you, Khun Sataporn. Start with business group update. On 6th of July, BTS Group successfully issued senior unsecured bond of THB 13 billion to the institutional and high net worth investors with 2.1x for the subscription, the bond was rated A by TRIS Company Ltd. and was issued in 3 tranches with an average coupon of 3.21%. The proceeds from this bond were used for debt repayment. And next, in this quarter, our subsidiary, Kingkaew Asset Co., Ltd., which BTS Group holds the 100% has sold its investment in Future Domain for THB 2.3 billion. Future Domain is a company engaging in property holding business and owns land at Pradit Manutham Road, here in the pink frame, as we know, as [indiscernible]. The land is located in the prime area surrounded by the famous supermarket and more like Central EastVille, The Crystal Park and [ Lotus and hotel around here ]. Future Domain -- now Future Domain was acquired by U City 50% and Noble Development 50%. The purpose of this investment of the 2 companies is to jointly carry out property development for sale projects. Next on MOVE update. As of June 2021, the construction of Pink and Yellow Lines was underway with around 80% completed. After the temporary shutdown of the construction worker camp following the spreading of COVID-19, the government have mandated to close the worker camp begin of June. And now we have resumed the construction with the [indiscernible] following the Ministry of Interior since this month, thus, the expected partial operation of 2 lines has been shifted. The Yellow Line will open partially in early next year, and the Pink Line will open in the mid of 2022 or next year. But however, the full operation, we remain -- our expectation to start within 2022. Next, on non-rail business. From 11th of June this year, U-Tapao International Aviation has submitted the master plan of the U-Tapao International Airport and Airport City project to EEC Office. Now we are waiting for the NTP to go to the site and start the construction, which we expect to start in 2022. And last but not least, for the Intercity Motorways, we expect to sign the contract within the third Q 2021/22 of 2 roads, M6 and M81. So this the MOVE update. May I hand over to Khun Nantarach for MIX update.

Thank you, Khun Pornprasert. For MIX business update, during the first quarter, we evaluated our business by adding a further component to our e-commerce ecosystem. So in the 2nd August of 2021, BSS Holdings, VGI subsidiary, has successfully acquired 51% or around 2.1 million shares in Fanslink Communication Co. Ltd., or we can call them Fanslink, which is an omnichannel e-commerce service provider and the leading brand management for Chinese brand with a total investment of THB 306 million. So after this investment, Fanslink will be a subsidiary of the company. Therefore, the consolidation of Fanslink in our financial performance will start in the second quarter of 2021/22 going forward. This partnership will strengthen our O2O solutions through new [ core pillars ] which related to e-commerce ecosystem. Fanslink leap will increase eyeballs and conversion points for VGI through online stores in e-commerce marketplace such as the Lazada, Shopee, JD Central and [ handle selection fan page ]. Moreover, Fanslink will be a gateway for us to connect with Chinese brand, which we are able to offer other marketing solutions for them. Like previously, we are able to connect Thai advertiser with the Chinese consumers through iClick. But now we enable Chinese brand to connect with the Thai consumer through Fanslink. Lastly, together with Fanslink, we aim to create new synergies that will provide several value added to our product and services for consumers and customers, which expect to see the first launch of the synergies with Fanslink in the -- within the third quarter of this year. So that's all about the media update. Next, I would like to pass to Khun [ Ton ] for property business update. Thank you.

Okay. Thanks. For the U City's key update, starting on the left-hand side, U City successfully increased capital of THB 15.7 billion by issuing [ 22.5 billion new U preferred share ]. The proceed was used for 3 major part: first, to repay of loan for THB 10.2 billion; second, for the investment in development of project for THB 1.2 billion; and third, to support normal business operation for THB 4.3 billion. And on the right-hand side, we are aiming for COVID rebound and look forward to an optimistic outlook ahead. We are expecting vaccination to be the key to recovery as Europe travel are close to its recovery [ reveal ] even though Thailand is still glooming. As of now, almost all of our European and Thai hotel were in operation. And next, we will move on to BTSGIF update.

Thank you, Khun [ Ton ]. Good afternoon, everybody. Today, I will present the financial performance of BTSGIF for the first quarter of fiscal year 2021/22. In the first quarter, total income of the fund was THB 167 million, up 16% year-on-year but down 60% Q-on-Q. Total expenses of the fund were THB 19 million, down 4.2% year-on-year from lower fund management fee and expenses. However, total expenses lost by 4.8% Q-on-Q from annual advisory fee being paid in the first quarter. Net investment income was THB 147 million, up 19% year-on-year but down 63% Q-on-Q. In this quarter, the fund recorded loss on investment of THB 90 million. This resulted from the adjustment of the projected net revenue in the last 9 months of fiscal full year 2021/22 to be aligned with the ongoing situation of COVID-19 pandemic. Changes in net asset resulting from operation were THB 57 million. Adding back assets liquidity from loss on investment of [ THB 90 million ], total distribution available to unitholder will be THB 147 million or THB 0.025 per unit. Next slide is the income from investment in NRTA. In the first quarter, farebox revenue was THB 492 million, decreasing 11% year-on-year and 42% Q-on-Q. The decrease came from the decline in ridership from the impact of the new wave of COVID-19 pandemic since April this year, but partially offset by the increase in average fare to THB 30.3 per trip. O&M costs were THB 326 million, decreasing 20.9% year-on-year and 23.7% Q-on-Q. Year-on-year decrease came from the reduction in CapEx as there was automatic fare collection system upgrade of THB 33 million last year and employee expense from lower allocation costs from the opening of new Green Line extension. Q-on-Q decrease came from the reduction in, first CapEx, as there were station improvement of THB 11 million and rolling stock of THB 6 million in the previous quarter. Second, saving expense, there was a cost for ridership and fare analytics project in the previous quarter. The property insurance premium as normal payment is scheduled in the fourth quarter every year. For administrative and other expense, as there were 4 test of environmental testing fee in the previous quarter, which is scheduled in every 2 years, income from investment in NRTA was THB 166 million, increasing 17.5% year-on-year but decreasing 61% Q-on-Q. Next slide is the balance sheet. As of the 30th of June 2021, total asset was THB 45.2 billion. The main component were investment in NRTA of THB 44.7 billion, decreased THB 90 million from the previous quarter. Total liability were THB 110 million. Net asset value was THB 45.1 billion, equivalent to THB 7.79 per unit. As of 30th of June, the fund had deficit of THB 10.7 million. Next slide, the core network performance. In the first quarter, ridership was 16.2 million trips, down 12% year-on-year and 42% Q-on-Q from the new wave of COVID-19 pandemic since April this year as the government has issued notification forcing temporary closure of various business and request people cooperation to stay at home and work from home in order to control the spread of infection. Average weekday ridership was 211,000 trips, down 16% year-on-year and 42% Q-on-Q. The average fare in the first quarter was THB 30.3 per trip, increasing 1.2% year-on-year and 1% Q-on-Q. Next slide is the distribution summary. As of 30th of June 2021, the fund had deficit, thus the fund is unable to pay a dividend in this quarter. However, the fund had cash from the operation in the first quarter of approximately THB 0.025 per unit. Therefore, the fund will not pay the distribution in the form of capital return in this quarter but will accumulate with the next payment. For the update of the Saint Louis Station. The forecast of Saint Louis Station it was begun operation on 8th of February. The forecast of works was 99.8% in June, delaying from the plan due to temporary suspension of construction from COVID-19 situation. The remaining work or past renovation work is expected to be finished around September. And [indiscernible] we're just waiting for finalization of the location. That's all for BTSGIF. Thank you. Our next session will be Q&A.

Thank you, Khun Siriphen. [Foreign Language]

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