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

Good afternoon, analysts and fund managers, and welcome to the BTS Group and BTSGIF's First Quarter of 2022 Analyst Meeting. I'm Ms. Cassada, and I'll be your moderator during this presentation. Before we commence the meeting, please make sure your microphones are muted and cameras are turned off during the presentation, and we will open the Q&A session after the presentation has concluded. As usual, we are honored to welcome all the management team, starting from Mr. Surapong, CEO of MOVE Business; Mr. Kong Chi Keung, Deputy CEO of BTS Group; Mr. Surayut, CFO of BTS Group; Mr. Daniel, CIO of BTS Group; Ms. Chawadee, Financial Controller of BTS Group; Ms. Siriphen, Fund Manager of BTSGIF; and Ms. Soraya, Acting CEO and CFO of U City. And lastly, the IR team from BTS Group, VGI, MACO and U City. For now, I'd like to hand over to Mr. Daniel to recap on the first quarter's overview and financial performance.

Thank you, everyone. Jumping straight into the first quarter business highlights. It's actually been only about 2 months since we last presented. So not too many updates, but let me jump through them anyway. The Pink and the Yellow Line has now moved to 91% and 93% completion, respectively. You may have seen that during the last couple of months there was an MOU signed in relation to the spur line for our walkway connecting us to the Pink Line extension. We're expecting full operations of the spur line by 2025. On the Orange Line bidding, some court events. There was a favorable court ruling in relation to the first bid and BTS Group decided not to participate in the second bid. Well, I'm sure we'll have some discussion on that later. In the MIX business, VGI essentially acquired 60% of NINE, another listed company. And also on Rabbit Care, Rabbit Care did a Series C fund-raise, which values Rabbit Care at about THB 5.5 billion; VGI's stake, around 46%; BTSG's stake, around 23%. So you can put that initial and the past valuations if you want to. On the MATCH business, we continue the transformation of U City to financial services. The only sort of notable update was that in the quarter, A LIFE rebranded to Rabbit Life. And again, we'll have some updates on that later. The financial highlights. Profit and loss. Operating revenue declined 44% year-on-year to THB 5.2 billion, as revenue has sort of rebased towards a nonconstruction phase. MIX revenue picked up, increasing 67% year-on-year to about THB 1 billion. EBITDA margin was around 48%, with improvement from year-on-year. Net profit was down to THB 536 million, down 61% year-on-year. On the balance sheet side, again a strong balance sheet. Cash liquid investments run now at THB 19 billion. Low leverage. Net debt to equity around 1.5x. On the cash flow, slightly different this quarter. You saw a lot more of the cash flow supported by debt and equity capital markets activities. RO proceeds, VGI, about THB 12.9 billion. Sustainability-linked bonds issued, around THB 11 billion. A lot of that was used for debt reduction, around THB 12 billion, as well as some investment in the MOVE Pink and Yellow Lines. Now jumping forward to the Q1 overview. Total revenue, as I mentioned, at THB 5.28 billion, down 44%. In the bottom right-hand corner, you can see the operating comparison waterfall chart, where, clearly, most of the attribution is towards the MOVE business. At a recurring EBITDA level, recurring EBITDA was THB 1.89 billion, down 18% year-on-year due to softer quarters from MIX and MATCH EBITDA. At a net profit level, THB 536 million, down significantly, a 61% decline. Again, the above effects exacerbated by increasing finance costs. On a margin level, gross profit margin improving to 35%; recurring EBITDA up to 48%; but net profit, a decline to 10% margin. All in all, revenue contribution, you see that MOVE contribution now has declined to around 68%, with MIX at 28% and MATCH at 4%. On to the cash flow. Cash improved -- cash position improved from THB 4 billion to THB 10 billion. If we look at the components there, you can see again it's dominated by the sources of cash being cash flow from financing and others. Again, the key components there were related to the VGI rights offering, around about THB 12.9 million net received, as well as from sustainability-linked bonds and Green bonds, a net of THB 9.7 billion. But there was significant pay-down of debt to financial institutions, around THB 11.8 billion. On the investment side, not too much happening. Again this quarter, some Treasury management, around about THB 1.7 billion of investment and much lower investment in the Pink and the Yellow lines. Cash flow from operation was a drain of cash of THB 1.9 billion. But adjusting for the items below in the footnote, you can see actually a positive source of around THB 1.6 billion. So leaving us with THB 10 billion cash at the end of the quarter. And now I'll hand you over to the MOVE business. Thank you very much.

Thank you, Daniel, for the overall performance. So I would like to go through the segmental performance, beginning with the MOVE business. In the first quarter of 2022 and '23, MOVE operating revenue was reported at THB 2,704 million, decreased by 61% year-on-year, chiefly from the construction revenue of the Pink and Yellow Line, which decreased by THB 4 billion due to the construction delay from the COVID-19 situation. And secondly, the service revenue for the provision in E&M works and the train procurement related to the Green Line extension decreased by THB 373 million. However, the decrease was partially offset by higher O&M revenue of THB 105 million, increase of 6.7% year-on-year. Also, the cost was also in line with the revenue performance, with gross profit at THB 1,093 million, decreasing by 18% year-on-year. However, we recognized the share of profit from BTSGIF in this quarter, mainly from the strong ridership rebound. And for the MIX performance, the operating revenue was reported at THB 1,097 million, increase by 67% year-on-year, majority from the revenue of Out-of-Home Media segment of THB 410 million, increase by 8.9% year-on-year. And also the consolidation of the Fanslink allows the revenue of the distribution increase to THB 370 million. Lastly, Digital Services revenue also reported at THB 317 million, increase by 13% year-on-year. Also the costs in line with the revenue trend. This brought our gross profit to THB 321 million, increase by 31% year-on-year. For the MATCH business, the operating revenue was reported at THB 151 million, decline by 12% year-on-year due to the lower construction from the HHT Construction Company Limited. However, this quarter we see a lot of improvement of U City performance. Hence, we recognized a share of profits of the U City around THB 308 million, predominantly supported by a strong recovery of hotel business and also the contribution from insurance revenue from Rabbit Life. And for the financial position of the company as of June 2022, the overall assets stood at THB 254 billion, slightly decreased by 0.8%. However, the asset itself remain strong as we receive the cash from VGI RO subscription during the period. Also the cash and liquid investments remained strong at THB 19.3 billion. As Khun Daniel mentioned earlier, so while the adjusted net debt to equity was at 1.47x, which is still under our appropriate range, at least indicated our strong liquidity as well as the capability to service our short-term and long-term debts. And I would like to hand over to [indiscernible] for the business update.

Thank you, Chawadee. So over to the MOVE updates for our Pink and Yellow Lines. As of July 2022, the Pink Line operations running from Khae Rai all the way to Min Buri is currently at 91% near completion. As for our Yellow Line operations running from Lat Phrao all the way to Samrong station, is currently at 94% near completion. We can expect full operations from both of these lines within the second half of next year, 2023. Moving on to the Skywalk Connection in the Pink Line extension. On August 2, 2022, Bangkok Land, or BLAND, held a signing ceremony with Northern Bangkok Monorail, or NBM, for the construction of the Skywalk Connection in the Pink Line extension. Additionally, this will run along the Pink Line extension, consisting of 3 kilometers and 2 stations, which starts from Si Rat station, PK-10, it's right over there at the bottom, which lands near the IMPACT Challenger and Muang Thong Thani Lake, by providing a direct connection to Muang Thong Thani. Some of the key destinations include, of course, the IMPACT Exhibition and Convention Centers; various malls, such as Cosmo Bazaar/Walk; and the university campuses around that area. The CapEx for the Skywalk construction will be incurred by BLAND of THB 1 billion, whereas our CapEx amounts to THB 1.7 billion. Moving on to the UTB update. On 15th August, BTS Group formed a new joint venture to oversee commercial operations at the U-Tapao Airport under UTB Company Limited. UTB Company Limited will manage the airport city in U-Tapao International Airport and Eastern Airport City Projects. The shareholding structure is as follows: BTS Group holds 55%, whereas Bangkok Airways Company Limited holds 20%. Moving on to the MIX update. Let me just quickly give you a brief overview of VGI's platform again. It consists of advertising, payment and distribution. In advertising, it's O2O Marketing Solutions. Payment is run by Rabbit Group. And within distribution, you have Fanslink, Jaymart, Singer and Kerry Express, with the new addition of NINE in the next MIX update, which I will quickly run you through. For the first advertising segment, VGI collaborated with GMM Grammy Public Company Limited to launch a new phenomenon through unique media campaigns across Bangkok. VGI launched a media campaign known as 3D City Pop, with 3D Entertainment Illusion Technic implemented on VGI's digital Out-of-Home Media to showcase interactive 3D content. In addition to that, BTS Trainbody product continues to gain popularity among national and global brands, including Tory Burch and Coach, using the Trainbody. For the payment section, in July 2022, Rabbit Care successfully raised THB 7 million (sic) [ THB 700 million ] in Series C funding round. At the same time, BSSH also purchased RCare shares from existing shareholders. Therefore, the holding in RCare increased to 51.6% from 49.7%. In addition to that, BSS Holdings, a VGI subsidiary, invested a total of THB 425 million in RCare through the following transactions: newly issued preferred shares of 56,300 shares in Series C round, total of THB 269 million; and existing preferred shares and ordinary shares from RCare existing shareholders of 38,350 shares. With the additional capital, RCare aims to invest in new business opportunities and new improved technological infrastructure to stimulate competitive advantage. And the last -- probably, that -- in the last section for Rabbit Card and Rabbit LINE Pay, Rabbit grew its user base through the expansion of point of usage. As of 30 June 2022, number of Rabbit cards reached 15.3 million cards, while the number of Rabbit LINE Pay users increased to 9.7 million users. For the distribution segment, on July 22 (sic) [ June 22 ], VGI completed 60% investment in NINE, bringing the amount to THB 3,147 million, resulting in reclassification as VGI's subsidiary. VGI also made a mandatory tender offer in NINE during 4th July to 10th August and after the completion of tender offer, none of NINE's shareholders sold shares to VGI. After the transaction, NINE received the rights to manage merchandising spaces on 31 BTS stations. Currently, there are 3 Turtle shops, which is a lifestyle store and has already opened its operations across 3 BTS stations, including Saint Louis, Victory Monument and Phloen Chit stations. That's it for the MIX update. Moving over to the MATCH. For the key developments in the first quarter, may I again reiterate U City's transformation from its real estate business, which came under pressures from the prolonged COVID-19, which had resulted in lower returns combined with high-risk volatilities. Meanwhile, the financial services business displayed high growth trajectory, higher return on equity, demonstrating resiliency compared to the hospitality and real estate business. U City took its first step into the financial services business by acquiring 75% in A LIFE, or now rebranded to Rabbit Life. So with the new rebranding of Rabbit Life comes the new vision under, "Think differently to improve your life with a life insurance that hedges your bets and provides simplified solutions." Apart from this vision, Rabbit Life operates on 3 pillars. The first one is a new code of conduct, or practice guideline, known as listen-learn-create operating model, placing emphasis on customer-centric principles. This will allow Rabbit Life to quickly adopt feedback from customers and reduce the complexities, which tailor products and services based on the customers' preferences. The second pillar consists of the 5 cores, consisting of wealth, health, protection, rewards and savings. Within this total chart, customers are able to mix and match to customize certain products and services based on the desired choices, giving them the ultimate customization based on their choices. Lastly, the healthier ecosystem and synergies. With the incorporation of BTS Group's 3 platforms, Rabbit Life is supported by unique data with an outreach of 40 million audiences along with numerous business affiliates to position itself as a contemporary and innovative insurance brand. Furthermore, Rabbit Life has revised its strategies into the both short-term and long-term sections. The short-term is to expand its agent base, improving broker operations and products, while expanding the selling channels, which will bring them closer to their long-term strategy. Their long-term strategy will focus on an extensive growth premium to achieve peak profitability. On your right-hand side, within the year 2022, we expect Rabbit Life to reach THB 2 billion of total premiums. And during the next 3 years, it strives to be amongst the top 10 insurance companies in Thailand. That's it for the presentation. I would like to hand over to Ms. Siriphen, from BTSGIF, who will take you through the performance of the first quarter. Thank you.

Thank you so much, [indiscernible]. Good afternoon, everybody. Today, I will present the financial performance for BTSGIF for the first quarter of Fiscal Year 2022/23. In the first quarter, total income of the fund was THB 583 million, remarkably up 249% year-on-year and 55% Q-on-Q, mainly as a result of the increase in income from investment in NRTA of 250% year-on-year and 55% Q-on-Q, to THB 582 million. Total expenses of the fund were THB 20 million, up 3.9% year-on-year and 2.6% Q-on-Q, from the provision of incentive fees for BTSG. Net investment income was THB 563 million, up 282% year-on-year and 58% Q-on-Q. In this quarter, the fund recorded loss on investment of THB 770 million from the increase in [indiscernible] according to an increase in [indiscernible] used for calculated value increased from 6% in the previous quarter to 6.5% in this quarter. Changes in net asset resulting from operations were minus THB 207 million. For the next slide, for the first quarter, income from investment in NRTA. In the first quarter, farebox revenue was THB 998 million, increasing 103% year-on-year and 25% Q-on-Q. The increase came from the ridership increased by 89% year-on-year and 28% Q-on-Q from the relief of COVID-19 pandemic and average fare increase by 7.4% year-on-year. For the O&M costs, O&M costs in this quarter were THB 416 million, increasing 28% year-on-year but decreasing 1.2% Q-on-Q. Year-on-year increase came from the increase in, first, selling expense from Rabbit Reward point cost for our new promotion and, second, employee expenses from bonus payment in this quarter. Q-on-Q decrease came from the reduction in, first, property insurance premium, as there was the payment of insurance premium in the previous quarter; second, selling expense, as there was a data analytics and marketing service fee in the previous quarter; but partially offset by an increase in employee expenses from bonus payment in this quarter. Income from investment in NRTA was THB 582 million, increasing 250% year-on-year and 55% Q-on-Q. Next slide is the balance sheet. As of 30 June 2022, total assets were THB 38.8 billion. The main components were investment in NRTA of THB 37.9 billion, decreased by THB 770 million from 31st of March, '22. Total liabilities were THB 28 million. Net asset value was THB 38.8 billion, or THB 6.7 per unit. Next slide is the Core Network performance. In the first quarter, ridership was 30.6 million trips, increasing 89% year-on-year and 28% Q-on-Q, from the relief of COVID-19 pandemic. Average weekday ridership was 395,000 trips, up 87% year-on-year and 34% Q-on-Q. Average fare in this quarter was THB 32.6 per trip, increasing 7.4% year-on-year on the termination of monthly pass card issued on 30 September 2021, but decreasing 2.1% Q-on-Q. As in the previous quarter, there was a recognition of revenue for non-claimed trips of monthly pass card, which were extended as we've seen increase in COVID-19 situation since last year. Next slide, the distribution summary. The fund announced a capital return for the first quarter of THB 0.097 per unit. Book closure date is on 29 of August '22, and payment date is on 12 September '22. Total distributions since inception is THB 5.747 per unit, in the form of dividends of THB 4.342 per unit and capital return of THB 1.405 per unit. That's all for BTSGIF. Thank you.

Thank you, Siriphen. And that concludes our first quarter meeting presentation. We will move to Q&A session right now. My colleague, Mr. Saran, will be your moderator for this segment. Thank you.