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

Good afternoon, analysts and fund managers, and welcome to the third quarter 2021/'22 analyst meeting of BTS Group and BTSGIF. [Operator Instructions] As we shared today, we are honored to welcome all the management team starting with kun Surapong, CEO of BTSG; kun Kong Chi Keung Deputy CEO of BTS Group; kun Surayut CFO of BTS Group; kun Daniel CIO of BTS Group; kun Chawadee, Financial Controller of BTS Group; and other management from BTSGIF, kun Siriphen Fund Manager; and kun [indiscernible] acting CEO and CFO of [indiscernible]; and lastly, our IR Chief of BTS Group, [indiscernible]. So now I would like to hand over to kun Daniel to report on the performance in this quarter.

Thank you, Jane. Welcome, everyone, to the third quarter analyst meeting. I think this is the second year or the eighth quarter now that we've been talking about COVID. Getting a little bit tiring, it's probably the quarter that was characterized by all of us knowing at least somebody has caught COVID this quarter. Hopefully, next quarter, it's not that we all know that we all had COVID as well. So anyway, the financial highlights for this quarter, you can see have continued to be impacted by the COVID pandemic. On the P&L highlights, you'll see a total revenue of THB 9.2 billion, which was down 23% year-on-year, but showed good sequential improvement, 34% quarter-on-quarter. Recurring EBITDA was around about THB 2 billion, with a still healthy margin of 25%. And net profit, again, showing a year-on-year decrease to around 38% by an 83% sequential Q-on-Q increase of THB 1.1 billion. From a balance sheet point of view, our financial position still remains strong, with cash and liquid investments of THB 40 billion, and low leverage -- adjusted net D/E of 1.62x, down in the previous quarter of 1.4x. From a cash flow point of view, essentially, in the 9 months, we've seen increased loans and loans drawdowns, whether it's short-term financing or long-term financing. And those loans that have essentially been invested in the MOVE business, where we saw increase in investment in the Pink, Yellow and Green lines of around THB 12 billion, as well as investment associates both the U City preference shares as well as VGI's investment in Jaymart. Moving on to the overview of the P&L. For the third quarter, you'll see total revenue, THB 9 billion, down about THB 2 billion from THB 11.9 billion year-on-year. There's 2 factors here. One factor is around about THB 1.6 billion, no repeat of a land sale in the previous year. And the second factor is essentially a THB 1 billion reduction in operating revenue. You can see the breakdown in the bottom right-hand corner chart. Again, most of that reduction coming from the MOVE business, THB 1.6 billion, but an increase in the MIX, [ fixed net ] and will go into the segmental analysis later on. Recurring EBITDA level, THB 1.97 billion, down 26% year-on-year. Again, it's the above lower revenue, as well as lower other income and interest and investment income that made those contributions. And at a net profit level, we saw recurring net profit, THB 604 million versus THB 1.3 billion. And net profit after MI, THB 1 billion, down 38% from THB 1.6 billion. And again, these numbers here were -- happened somewhat by increase in finance costs as the bank -- as the company borrowed more. Margins slightly weaker across the board, both year-on-year and Q-on-Q and that left us with a 3Q operating revenue breakdown around about 79% of our revenue coming from the MOVE business, around about 20% -- 18% from the MIX business. On to the cash flow. Beginning cash was THB 3.8 billion. This is at the beginning of the year, so 31st of March 2021. Cash flow from operations, negative THB 12.8 billion. As usual, masked by various investment activities where you can see the adjusted numbers below the actual adjusted CFO is a positive THB 1.2 billion, after adjusting those items. In terms of the financing cash flows, these nine months we saw THB 15.9 billion of investing cash flows. A lot of that was from -- THB 8 billion was from the subscription to U City's RO and around about THB 6 billion was from the Jaymart investment by VGI. But there was also a THB 7 million investment in the Pink and Yellow lines during the quarter. That was offset by the repayment of long-term loans of around THB 5 million from New City and also the sale of investments in subsidiaries around THB 2 billion. On to financing cash flows, they represented a source of cash flows of around THB 28 billion. That's essentially separated into THB 13 billion financing or leverage, offset by THB 2 billion dividend payment. The THB 30 billion financing, about THB 22 billion was corporate level, financing around THB 12 billion short-term loans from financial institutions and around THB 10 billion net debenture issuance, around THB 8 billion SPV level financing, which was the drawdown for the Pink and the Yellow lines. That left us with ending cash of around THB 3.8 billion, including cash and liquid investments, it would be around about THB 14.3 billion. Now for the segmental analysis, I'd like to hand over to [indiscernible]

Thank you, kun Daniel. For the segmental performance, we will begin with MOVE business. In this quarter, the company reported more operating revenue of THB 6,134 million, decreasing by [indiscernible] sales was mainly from a lower services revenue for [indiscernible] and a train procurement service for Green line extension of THB 1,273 million as we enter the tail end of development. Another reason for revenue reduction was from lower construction revenue for the Pink and Yellow lines of THB 0.4 billion year-on-year, THB 2.7 billion in this quarter. However, the O&M revenue in this quarter grew by 15% year-on-year to THB 1.5 billion, largely thanks to the full quarter recognition of the full operation of the Northern Green Line extension in December 2020. Let's see a cost of MOVE. The cost decreases by [ THB 1,492 million ] to THB 5,069 million this quarter, simply due to a lower recognition of cost related to the aforesaid development of new lines. Next one, Mass Transit-related interest income, which rose by smart 22% year-on-year to THB 874 million. EBITDA margin in this quarter improved significantly from [ 175.7% ] in the previous year to 33.2% this quarter, partially driven by the lower recognition of the revenue from development of new lines, which have lower margins. And another reason of the increased margin was from a higher mass trust-related interest income. Moving on to MIX business. In this quarter, mix has a remarkable growth of operational revenue of 99% year-on-year to THB 1,493 million, mainly from the full quarter consolidation of Fanslink by VGI, as well as the growth in the Rapid Group. In this quarter, revenue from Fanslink recorded under the distribution business and revenue from Rapid Group was under digital services. Within the subsegment, distribution revenue 681 million, contributing 45% of total mix revenue. Digital services revenue in this quarter increased by 31% year-on-year to THB 383 million, chiefly due to a higher insurance commission and regeneration from the Rapid Group. In this quarter, out-of-home advertising was affected by the pandemic resulted in a year-on-year decline of 6% to 429 million contributing 29% of MIX revenue. Cost of MIX also rose as an effect from the consolidation of Fanslink, which rose by 220% to THB 1,161 million. And next on MATCH business. Operating of MATCH business in this quarter was THB 152 million, declining by THB 12 million year-on-year, should be from a lower revenue from SST construction. And in this quarter, we recorded a share of profit from U City at THB 475 million, from a share of loss of THB 1,289 million, in the previous year is supported by a lower recognition of U City impairment of assets and the record of an unrealized gain from the recognition of the investment in Jaymart by U City in December last year. Moving on to our financial position as of 31st of December last year. The total assets were THB 244 billion, increasing by 15% year-on-year from 31st of March 2021, lastly from an increase in investment in associates of THB 15 billion, mainly from the subscription of U City's RO in May 2021 and an investment in Jaymart by VGI in December last year. An increase in receivables related to Mass Transit's project, up THB 14 billion, an increase in elevated train project cost of THB 8 million from the construction of the Pink and Yellow lines. As well as an increase in investment in properties, up THB 2.5 billion and from land acquisition around Yellow line depot, having offset with a decrease in net long-term loans to related parties of THB 5 billion, following U City debt repayment and a decline in assets classified as held for sale of THB 2 billion. Total liabilities in this period implied 21% to THB 164 billion, chiefly from an increase in short-term loans from financial institutions and bills of exchange payable of THB 12.5 billion, and the increase in net long-term loan debenture from -- sorry, a net long-term debenture of THB 9.8 billion, mainly driven by the issuance of THB 13 billion, which is group debenture on 6 July as well as an increase in long-term loans of THB 7.5 billion. However, an increase in liabilities was partially offset by a decrease in income tax payable of THB 1.3 billion. Total equity rose by 5% to THB 80 billion, mainly from a higher NCI of THB 1.7 billion, following the payments of additional share capital in NBM and EBM, as well as higher of retained earnings of THB 1.4 billion. And the average -- on the average position, the adjusted net debt to equity stood at 1.62x from adjusted net debt of THB 129 billion. So these are segmental performance and financial position of the company in this quarter. For the business update may I hand over to Sataporn kun.

For the business up there starting with a new business within the Rail segment. The construction of the Pink and Yellow lines as of January 2022 was over 85% complete. And expected [ partial ] operations remains to begin 2022 for both lines. And on the non-rail segment, the notice to proceed of the M6 and M81 intercity motorways projects were issued on 21st December 2021, marking the start of toll gates construction as well as the installation of the toll collection system, traffic management and control system for both groups. And for the MIX business update, I would like to hand over to kun [indiscernible]

Thank you, Sataporn. For mixed business, I would like to give you a quick update on VGI capital increase. On 25th January 2022, the Board of Directors approved the issuance and offering of 2,583 million newly issued ordinary shares through a rights offering at the share price of THB 5 to the existing shareholders whose name appear on the shareholder list record date as of 9 February 2022, at a ratio of 10 existing shares to 3 newly issued shares, totaling THB 13 billion. The company plans to use the proceeds for loan repayment around THB 8.2 billion, which mainly the investment in Jaymart and we also plan to utilize the rate as our source of fund to support business expansion and future investment plans. For the next slide, the company will also issue and allocate VGI Warrant #3 to our subscribers at a ratio of 1 newly issued ordinary share per 1 unit of warrant. The warrant exercisable for a period of 5 years for the issuance [ stayed ] at THB 11.9 per share. These transactions are subject to an approval of extraordinary general meeting will be held on 1st March 2022. So that's all for the mixed business update. Next, let me pass back to kun Sataporn for U City business update.

Thank you, MATCH business after U City announced its intention to move into the financial services business and initially invested in Jaymart, Singer, and A Life, during the last quarter of 2021. It is now in the process of divesting its European hotel assets portfolio by entering into an agreement to sell approximately THB 6.3 billion worth of the real estate assets and plan to truly divest the remaining THB 26 billion of real estate portfolio within the next 3 years. And within the financials, U City is currently exploring in some conventional and innovative products and services, to meet the change of today's people lifestyle and the rise of disruptive technology as well as leveraging the readiness of retail to [indiscernible] platform to generate the optimal sustainable returns to its shareholders. And another MATCH news is a 100% investment in Rocket Holdings, HK Limited by BTS Group. Rocket is a holding company in Hong Kong that owns 200 shares in TBN Software Company Limited, or TBN, a Thai company that specialize in digital transformation consulting and software development. With most experience in low-code development platform, serving Thai, [indiscernible] and multinational corporations. And as illustrated in the bottom right-hand side, the global low-code [ software ] market is expected to expand by 6x times of total market growth or equivalent to 46% per year from 2019 to 2023. And next will be the performance of the BTSGIF, which I would like to pass over to kun Siriphen Fund Manager [indiscernible].

Thank you, kun Sataporn. Good afternoon, everybody. Today, I will present the financial performance of BTSGIF for the third quarter of fiscal year 2021 to last '22. In the third quarter, total income of the fund was THB 392 million, down 51% year-on-year, but up THB 37x Q-on-Q. The income from investment in this Farebox was THB 392 million, down 51% year-on-year, mainly from the impact of Delta variant of COVID-19 outbreak, but up 39x Q-on-Q, mainly from the relief of COVID-19 situation. Total expenses were THB 14 million, down 14% year-on-year and 12% Q-on-Q, resulting from lower fund management fee. Net investment income was THB 378 million, down 52% per year but up 60x Q-on-Q. In this quarter, the fund recorded loss on investment of THB 250 million, this resulting from the adjustment of the projected revenue in the fourth quarter of this fiscal year to reflect the Omicron variant of COVID-19 situation, thus resulting in changes in net asset resulting from operation of THB 128 million. For 9 months, total income was THB 569 million, down 66% year-on-year, and total expense were THB 15 million, down 11% year-on-year. Net investment income was THB 519 million, down 68% year-on-year. The fund recorded gain on investment of THB 9 million, thus resulting in changes in net asset resulting from operation of THB 528 million. Next slide is the income from investment in NRTA. In the third quarter, Farebox revenue was THB 767 million, down 34% year-on-year, but up 129% Q-on-Q. Year-on-year decrease came from the decline in ridership by 41% to 23.4 million trips from the impact of Delta variant of COVID-19 pandemic. But was partially offset by the increase in fare by 11% to THB 32.8 per trip from the termination of the monthly pass card issue on 30th September 2021. Q-on-Q increase came from the increase in ridership by 120% from the relief of COVID-19 situation and the increase in average fare by 4.5%. For the O&M cost, O&M cost in this quarter was THB 375 million, increasing 3.5% year-on-year and 15.7% Q-on-Q. Year-on-year increase came from the increase in employee expense from bonus payment in this THB 31 million, and selling expense from Rabbit Rewards payment of THB 15 million, but was partially offset by the decrease in CapEx as there are no significant CapEx in this quarter and utility expenses from less electricity consumption and lower security expenses. Q-on-Q increase came from the increase in first employee expense from bonus payment this quarter. Second, selling expense from Rabbit Rewards payments. Third, maintenance spend from the maintenance cost of point machine and elevator and escalator, but was partially offset by the decrease in administrative and other expenses. As in the previous quarter, they were environmental testing fee and employee insurance premium being recorded for 2 quarters. Income from investment in NRTA was 392 million, decreasing 51% year-on-year but increasing 39x Q-on-Q. This slide is the performance for 9 months. Farebox revenue was THB 1.6 billion, 44% year-on-year from the decrease in ridership ship by 48% year-on-year and -- but was partially offset by the increase in average fair by 6.9% year-on-year. O&M costs were THB 1 billion, decreasing 13% year-on-year, mainly from the reduction in CapEx, employee utility expenses and selling expenses. Net income from investment in NRTA was THB 568 million, decreasing 66% year-on-year. Next slide is the balance sheet. As of 31st of December '21, total assets were THB 45.6 billion. The main component were investment in NRTA of THB 44.8 billion, decrease THB 250 million from 30 September '21. Total liability was THB 56 billion. Net asset value was THB 45.6 billion, equivalent to THB 7.87 per unit. As of 31st December, the fund had deficit THB 10.2 billion. Next slide is the core network performance. In the third quarter, ridership was 23.4 million trips declined 40.7% year-on-year from Delta variant of COVID-19 situation. The government issued notification forcing temporary closure of various business request people, population to stay at home and work from home and announced the curfew during mid of July to October '21. Compared with the previous quarter, ridership increased 119% Q-on-Q from the relief of COVID-19 pandemic during this quarter. Average weekday ridership was 281,000 trips, down 45% year-on-year, but up 107% Q-on-Q. Average fare in the third quarter was THB 32.8, increased 10.8% year-on-year from the termination of the monthly pass card issued on 30 September 2021, which the monthly pass ticket journey cheaper average fare compared to average prices of ticket, compared with previous quarter, average fare increased 4.5% Q-on-Q as average fare in the previous quarter was high, primarily from higher recognition of the expired ticket revenue. For 9 months, ridership was 50 million trips, declined 48% year-on-year and average fare was THB 31.7 per trip, increased 6.9% year-on-year. This is the distribution. The fund announced the capital return for 9 month of THB 0.089 per unit. Book closure date is on 28 February and payment date is on 14th of March. That's all for BTSGIF. Thank you.