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

Very good morning, analysts and fund managers. I am delighted to welcome you to the BTS Group and BTSGIF Third Quarter of Fiscal Year 2022 and '23 Analyst Meeting. As usual, we are joined by the management team, starting from kun Chi Keung, Deputy CEO of BTS Group; kun Surapong, the CEO of Mass business -- sorry, MOVE business; kun Surayut CFO of BTS Group; kun Daniel, CIO of BTS Group; kun Soraya, Deputy CEO and CFO of Rabbit Holdings; kun Chawadee, the Financial Controller of BTS Group; kun Siriphen, Fund Manager of BTSGIF; and the familiar faces of IR Teams from BTS Group, VGI and Rabbit Holdings. So before we commence the meeting, [Operator Instructions]. So without further ado, I would like to hand over to kun Daniel to recap on the third quarter overview and financial performance. Over to you, Daniel.

Thank you, all. Okay. Good morning, everyone. On the business highlights, starting on the MOVE side, you see that the Pink and the Yellow Line are inching towards their completion within this year. It's a significant milestone on the financial side as operation will result in both P&L recognition as well as the subsidy payments to support the cash flow of the group. On the legal side, with the outstanding debt, I could say the only sort of further update this quarter is that we continue to cement our legal defense position by fighting further lawsuits. On the MIX side, we've seen a strong ad recovery within this quarter. And on the distribution side, we see the group's downstream expansion towards the [ ends ] consumer, both through Fanslink with the launch of WANAA as well as by NINE, the launch of SuperRich Turtle and Turtle Taste!. On the MATCH side, last quarter, the TNL deal was still pending shareholder approval. That approval as well as the private placement and tender offer procedure has now been completed and so with the group only around 41% of TNL. Rabbit Holdings, formerly known as U City, reports strong quarter 4 results as well as full year results this week. It's [indiscernible] this quarter was around about THB 1.3 billion, and that's -- I guess that will be shown in more details later on. Moving on to the next slide. Some more sustainability accolades that the group have received. Once again, we are the top transportation company in the world, third year running as a credit by S&P Global, DJSI. And VGI also coming up strong, being #1 for the first time in the Media, Movies and Entertainment sector. On the financial highlights, again, this is for the 3-month period. P&L, again, we see operating revenue decline because we're moving towards the tail end of construction of the Pink and the Yellow lines. But despite that operating revenue reduction, pretty strong and recurring EBITDA, THB 2.7 billion, 41% year-on-year and margin of 60%. Net profit for the quarter was about THB 1 billion, which, whilst it was fairly flat year-on-year, was up strongly Q-on-Q. Balance sheet, not much update, again, although an increase in the cash and liquid investments to THB 28 billion mainly account of the fundraising of group's [indiscernible]. Cash flow, again, that's where we see the sustainability linked bonds issuance of about THB 31 billion. Our rights offering proceeds from VGI of THB 6.2 billion. Net cash paid for loans and financial institutions by THB 8.1 billion and further investment in the Pink and Yellow Lines over the 9 months now about THB 3.5 billion. Moving on into the P&L, 3 month -- 3 quarter and 9-month overview. Total operating revenue of THB 6.62 billion, down 28%. In the waterfall chart in the top -- bottom right-hand corner, you can see that almost entirely attributable to the decline in the MOVE operating revenue. Recurring EBITDA, however, shows a reverse of that position, as I mentioned, up 41% to THB 2.77 billion from strong EBITDA at MOVE and MATCH [indiscernible]. Recurring net profit, THB 1.16 billion, up 93%. Margins increasing across the board [indiscernible]. Operating revenue breakdown for this quarter, quite similar to last quarter at 66% MOVE, 30% MIX. Now on to the 9-month cash flow. THB 4 billion starting cash, ending in a THB 15.8 billion ending cash. Key components in between, CFO is a use of cash of THB 8 billion, although adjusted for the various items and that changes to be a source of cash of about THB 3.1 billion. The dominant cash flow section for this 9 months is, as you can see, the green tab, which is a THB 22 billion cash flow from financing, primarily from the issuance of the THB 31 billion sustainability linked bonds, offset with a few billion baht of repayment. As I mentioned before, the RO contributing [indiscernible] VGI contributing mainly to the cash received of THB 6.8 billion from noncontrolling interests, offset through net cash repaid to THB 8.1 billion and a dividend payment, the interim dividend payment of THB 2 billion. Financing -- sorry, investment cash flows, treasury management, about THB 5 billion. Investment in joint ventures around THB 2.8 billion, mainly the TNL transaction and investment in the Pink and Yellow Lines, as I mentioned, of THB 2.6 billion. Now moving on to the MOVE business, [indiscernible].

Thank you for Daniel. So now let me go through the segment [indiscernible]. Starting with MOVE business. In the third quarter, MOVE operating revenue was THB 3.1 billion, decreased by 50% year-on-year, mainly due to the lower revenue of construction of the Pink and Yellow Lines of THB 3.3 billion due to the development of the new rail lines [indiscernible]. Nevertheless, the decrease was partially offset by higher O&M revenue of THB 133 million. Moreover, we booked a share of profit in BTSGIF of about THB 102 million compared to a share of profit of THB 30 billion in the same quarter last year. This is due to the growth in BTS leadership. Moving on to MIX business. We booked operating revenue of THB 1.4 billion, a decrease of 7% % year-on-year. Majority of revenue came form 3 key business, Out-of-Home advertising, Digital Services and Distribution. For Out-of-Home advertising revenue was significantly improved by 36% year-on-year as a result of the rebound of BTS leadership and a positive impact during the high season. Digital Services revenue also increased by 11% year-on-year, driven by higher lead generation, commission fee from a RCare as well as higher revenue from card sales and transaction fee of Rabbit Card, while weaker sales from Fanslink [indiscernible] on distribution revenue. However, cost of declined in higher [indiscernible] revenue, bringing our gross profit of the business to THB 424 million, increased by 28% year-on-year. Moving on to MATCH business. We booked operating revenue of THB 182 million, an increase of 19% year-on-year. This is driven by the operation of Thana City Golf & Sports Club. And we also recognized a share of profit from investment in Rabbit Holdings of THB 497 million, compared to share profit of THB 43 billion in the same quarter last year, mainly due to higher revenue from Rabbit Life Insurance came from disposition of hotels in Europe and 7JVs with Noble bringing the share of profit of THB 676 million in the 9-month performance. For financial position of the company as of December 2022, the overall assets was around THB 274 billion, increase of 7%. So the assets remain strong as we receive cash from sustainability linked bond issuance and VGI rights offering subscriptions. Cash and liquid investments also remain strong at THB 28 billion, while the adjusted net debt to equity was 1.64x. So it remained under our appropriate lens, and this indicates a healthy liquidity as well as a capability to cover our short-term and long-term debt. Now I would like to hand it on to my colleague to walk you through the business update, [indiscernible].

Thank you, [indiscernible]. For the sustainability update, so allow me to reiterate kun Daniel's message once again. So BTS Group is the top 1% in transportation sector in S&P [ sustainability yearbook ] of this year. And our -- and VGI, our subsidiary is the top 1% and industry mover under Media, Movies and Entertainment industry. So in the previous quarter, we issued SLB, the sustainability-linked bond, for THB 20 billion, and that brings the group total sustainable finance initiatives to THB 62.8 billion, demonstrating our commitment to follow the ESG framework to become a sustainable company. So moving on to MOVE update. You can see that the construction of Pink and Yellow Lines is nearing completion of the Yellow Line 89% (sic) [ 98% ] and Pink line over 95%. So we expect the trial-run operation for 3 months and followed by the full commencement. For the Yellow Lines, we expect the trial-run operation to have in March to June 2023, and the Pink Line, the expected trial-run operation in May to August 2023. Moving on to non-rail update. The Intercity Motorways is on schedule, and we expect to commence the operation by 2025. Moreover, there is the market [indiscernible] area of M7 from Bangkok-Pattaya. And we are exploring the opportunity and we will to participate in the project as well. Moreover, a quick update on U-Tapao International Airport. So Eastern Economic Corridor Office [Foreign Language] has recently granted the entertainment overlay zoning district, or what we'd like to call in Thai, [Foreign Language], allowing business to conduct varieties of economic activities on the premise. Moving on to MIX update.

For MIX business update, VGI continues its great momentum from the first half of 2022/23, supported by strong improvement in the economic and tourism industry. And it's also reflected to the steady increase in BTS ridership, which has boosted brand's confidence to increase the advertising expenditure in our Out-of-Home Media. So during the third quarter 2022/23, VGI's Media has attracted both domestic and international brands, particularly well recognized brands to advertise their campaigns on our Media platform. Moreover, VGI also continuing to launch new campaigns with the partnerships, such as creative communication campaign, Whoscall The Safety Station, which VGI and SOUR Bangkok, who is the advertising agency, broadcast the memorable contents with sound to raise public awareness of scammers through VGI's digital Out-of-Home Media across 24 BTS Skytrain stations. For the payment business, following its successful [indiscernible] of Rabbit Care. So the Rabbit Care has invested in developing its own IT system, aiming to become Thailand's first insurance and financial product comparison platform. So during the third quarter 2022/23 Rabbit Care introduced CareOS technology, a proprietary IT system to search for credit cards and interim products that best service each customer's unique needs within 30 seconds. Rabbit Care believe CareOS technology will be another engine to drive the Rabbit Care performance through its effectiveness in matching customers' needs with suitable products. And currently, the number of the Rabbit Cards reached 16 million cards with an increase of 8.1% year-on-year, and Rabbit LINE Pay users increased to 10.2 million users with an increase of 9.9% year-on-year. For distribution business, with the strategy to increase the profit margin through developing its own brand, Fanslink launched Asia's first cannabis-based beauty brand, called WANAA, in October 2022. Currently, WANAA has 5 products categories, which is the whey protein, skin care, body care, beverage and well-being. And now that product are available on the Rabbit Selection application, Facebook, LINE, [ Shoppy ], Lazada, TikTok and Turtle shops across BTS Skytrain network. For Nation International Edutainment on NINE through its joint venture named, SuperRich Turtle Exchange Company Limited, opened its first currency exchange service under the SuperRich Turtle brand on Asok station. Moreover NINE also launched Turtle Taste!, a food and beverage pop-up store, which offer best-seller products from Turtle's brand, and Turtle Taste! [ chops ] are now available on [indiscernible] stations. And this is all for MIX business update, so move to MATCH business update.

So MATCH update, Rabbit Holdings, previously known as U City, has renamed the company name to provide new perspective for our shareholders and investors. So to transform its business into financial services business, it has [ divested ] THB 4 billion of property assets in 2022 and aim to continue so. As a result, we should bring an expected proceeds of over THB 30 billion, in which will be deployed to fund the future growth of the company. For the insurance business, Rabbit Life has successfully recruited more than 500 agents within 2022. And looking forward, it targets a new total premium of THB 2.5 billion to THB 2.8 billion in 2023. And that concludes the presentation from the BTS Group. Next, I'd like to hand over to kun Siriphen to give you a presentation on BTSGIF.

Thank you [indiscernible]. Good morning, everybody. Today, I will represent the financial performance of BTSGIF for the third quarter of fiscal year 2022/'23. In the third quarter, total income of the fund was THB 948 million, up 142% year-on-year and 10% Q-on-Q. The increase came from the income from investment in net farebox revenue, which increased to THB 946 million, [indiscernible] 142% year-on-year and 10% Q-on-Q mainly from the COVID-19 situation, gradually getting back to normal. Total expenses of the fund were THB 13 million, down 8.4% year-on-year from lower fund management fees and slightly down 1.7% Q-on-Q. Net investment income was THB 935 million, up 147% year-on-year and 10% Q-on-Q. In this quarter, the fund recorded gain on investment of THB 260 million. This resulted largely from the [ award ] adjustment of the forecast cash flow in the fourth quarter '22/'23 according to a [indiscernible] growth rate and [indiscernible] the previous forecast. Changes in net assets resulting from operation were THB 1,195. This slide is the third quarter income from investment in NRTA. Farebox revenue in the third quarter was THB 1,484 million, increased 93% year-on-year and 14% in Q-on-Q. Year-on-year and Q-on-Q increase was led by Thailand's nationwide cessation of COVID-19 restrictions, bringing the situation back to normal and leading to the resumption of daily life activities. For the O&M costs. O&M costs were THB 538 million, up 43% year-on-year and 22% Q-on-Q. Year-on-year increase came from the increase in fee serving expense from Rabbit reward point costs for new promotion and data analytic and marketing services fees; second maintenance expense from rolling stock refurbishment study expense; and third, utility expenses for higher ridership and operating hours as there [indiscernible] last year with [indiscernible] during October 2021, resulting in higher electricity consumption this year and also from higher FT cost. Q-on-Q increase came from the increase in fist selling expense on data analytics and marketing services fee, second maintenance cost from rolling stock refurbishment study expenses; and third, employee expense from bonus payment. Income from investment in NRTA was THB 946 million, increasing 141% year-on-year and 10% Q-on-Q. Next slide is the 9-month performance, I'll skip this one and go to balance sheet. As of 31 December 22, total asset was THB 38.97 billion. The main components were investment in the NRTA are THB 37.77 billion, increased by THB 260 million from 30 of September 22, investment in security and cash THB 1.1 billion and at asset of THB 63 million. Total liabilities were THB 10 million. Net asset value was THB 38.96 billion, equivalent to THB 6.7308 per unit. Next slide is the core network performance. In the third quarter, ridership was 35 -- 45.9 million trips, increasing 96.5% year-on-year and 14.3% Q-on-Q, mainly from Thailand's Center for COVID-19 Situation Administration, or CCSA, announced the ending of nationwide COVID-19 Emergency Decree on 30 September 2022. The Ministry of Public Health announced to reclassify COVID-19 from [indiscernible] to a communicable disease under surveillance for 1st October 2022. Furthermore, international tourists traveling to Thailand has no longer been required to show vaccination document or COVID-19 test result since 1st October 2022, thus bringing the situation back to normal and leading to the resumption of daily life activities. Average weekday ridership was 556,000 trips, up 97.8% year-on-year onto 12.7% Q-on-Q. Average fare in the third quarter was THB 32.3 per trip, down by 1.5% year-on-year for [indiscernible] last year, and down 0.2% Q-on-Q. For 9 month '22/'23 ridership increased 132% and average price increased 2.2% year on year. Next slide is the core network performance. This slide shows the average weekday ridership in each month. You can see that fiscal year '21/'22 ridership was affected by [indiscernible] of COVID-19 situation, thus ended wave of Thong Lor cluster in May '21, fourth wave Delta variant in August '21 and fifth wave Omicron variant in Jan '22. However, after March '22, the ridership has increased gradually. In December '22, weekday ridership increased to 572,000. Total ridership equals to 78% of people [indiscernible], which is higher than the previous forecast. Next slide is the distribution summary. The fund announced the capital return for the third quarter of THB 0.162 per unit. Book closure date is on 28th of February '23, and payment date is on 15 March '23. Total distribution since inception is THB 6.055 per unit in the form of dividend THB 4.342 per unit and capital return of THB 1.713 per unit. For the business update, since 1st January 2023 onward, BTSGIF has increased the effective fare [indiscernible] BTS Skytrain system for the 23.5 kilometer for [indiscernible] and on the [indiscernible] National Stadium Station to Saphan Taksin Station, including [indiscernible] extension between Taksin Station and [indiscernible]. The effective price increased THB 1 to THB 3 from THB 16 to THB 44 to THB 17 to THB 47. Senior Rabbit promotional fare [indiscernible] maximum discount of 50% from the effective fare. And the fare for 1-day pass or unlimited ride increased from THB 140 to THB 150. Next slide for the BTS challenge. In addition, after BTSGIF has previously terminated [indiscernible] promotion on BTS Skytrain system and launched new promotion to offer [indiscernible] from their journey. To redeem free trips including special discount and deals from leading brand, which was effective from 1st November '21 to 31st December '22, BTS has [indiscernible], including helping to unweigh the burden of [indiscernible] partage expense, therefore, [indiscernible] period of promotion for another year from 1st January 2023 to 31st December '23 with the new point structure to arrive with the fare increase. There [indiscernible] promotion during the first 3 months after fare increase 1st January to 31st March '23. For example, passenger traveling 10 trips per week will get 650 points during April to December '23 from previously 600 points and use 645 points to redeem free trips [indiscernible]. However, during Jan to March '23, passenger will get 800 points on [indiscernible]. Next slide is new package, XTreme Saving Pack. BTSC cooperates with Turtle 8 Company Limited to announce new package, called XTreme Saving Pack. The first one is called XTreme Savings 35 rides. Customer will receive BTS coupon 33 -- 35 trips and special discount coupon worth THB 1,000 from participating shops for a bundle price of THB 1,200 for adult and THB 1,000 for student. A second one called XTreme Savings Lite 15 rides. Customer will receive BTS coupon 15 trips and special discount coupon worth THB 300 from participating shops for a bundle price of THB 580 for adult and THB 470 for student. That is the promotion BTS [indiscernible].

Thank you to Siriphen, and that concludes the presentation.