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

Very good afternoon, analysts and fund managers. I'd like to give you a warm welcome to BTS Group and BTSGIF fiscal year-end 2022/'23 analyst meeting. As usual, we are joined by our management team, starting from kun Surapong, CEO of MOVE business.

[Foreign Language]

kun Daniel, CIO and IR Head of BTS Group.

[Foreign Language]

Kun Soraya, Acting CEO and CFO of Rabbit Holdings.

[Foreign Language].

Kun Chawadee, acting CFO and Financial Controller of BTS Group.

[Foreign Language]

Kun Kamolmas, Treasurer of BTS Group.

[Foreign Language]

Kun [indiscernible] Fund Manager of BTSGIF. Last but not least, similar faces from our IR team members from BTS Group BTI and Rabbit Holdings.

[Foreign Language]

[Foreign Language]

Before we commence the meeting, please make sure you microphones are mute and camera are turned off during the presentation. And we will be open for the floor for Q&A once the presentation is conclude. Without further ado, I would like to hand over to kun Daniel to recap on the full year business highlights and financial performance. Off to you, kun Daniel.

Thank you, kun [indiscernible]. As my team like to say Happy Thursday, welcome to June, and welcome to BTS Group's Full Year 2022/2023 earnings call. Starting with a review of the fiscal year business highlights. On the MOVE side and focusing on RHEL. The Yellow Line by 31st of March, had reached 99% progress in terms of construction, and we're expecting commercial operations to begin this month. The Pink Line was 96%, by 31st of March. However, as expectation of full commencement is it not until next year. Ridership continued to recover on the green line with March 2023 average weekday ridership reaching 570,000 passengers, about 78% of pre-COVID levels. Over the year, we had more than doubling the growth of the Green Line ridership to 163 million trips, which, obviously, helped the share of income from BTSGIF. O&M revenue continued to grow up 8.4% year-on-year for the BMA payment issues remain unresolved. On the mix side, advertising, strong demand for out-of-home advertising in line with the ridership rebound. Within Digital Services, we saw payment customer growth continued with Rabbit Cars up 8% year-on-year and Rabbit Line Pay users up 9.5% year-on-year. Our insurance brokerage Rabbit Care successfully raised about $700 million in a Series C round. And within the distribution segment of mix, there was a lot of activity with a corporate rebranding of NINE to SUPER TURTLE and branch expansion of Turtle, these branches of BTS stations now have reached 6 branches. Within MATCH and Rabbit Holdings, the asset divestment of the real estate phase continues to make progress with THB 5 billion with divestments in 2021 and 2022. Rabbit also expanded its service offering to AMC business with the acquisition of Prime Zone Asset Management. The MATCH showcase deal for the year was a completion of a 42% investment of TNL, which was completed by March of 2023, a business which focuses on property-backed lending and AMC. Now in terms of sustainability on the next slide, look, it still remains a core philosophy, and you will see listed a number of accolades, still carbon neutral, still the #1 ranked transport company in the world according to DJSI. Skipping now until the 2022/'23 financial highlights. It's fair to say that P&L had a softer year across the board. Operating revenue is down 30%, recurring EBITDA down 5.5%. And whilst the EBITDA margin was up to 42% on a recurring basis, net profit was still down 52% to THB 1.8 billion. The balance sheet remains strong. Cash and liquid investments at THB 21 billion and an adjusted net D/E ratio of 1.85x. The main activity on the cash flow side was from the financing side where we saw sustainability-linked bonds issued of THB 31 billion this year and RO proceeds of between -- of THB 6 billion. There was also a continued investment in the MOVE with the Pink and Yellow Line investments of THB 5.1 billion. Now on to the P&L overview. Total revenue and operating revenue both fell around THB 7 billion year-on-year. And you can see in the bottom right-hand corner of the chart, which business that was attributed to that's primarily from the MOVE business. Gross operating profit actually increased 7% year-on-year to THB 6.1 billion, which was led by MIX's GOP. Recurring EBITDA THB 7.6 billion, and recurring net profit after MI, down 28% to THB 2 billion, mainly from increased finance costs and increased SG&A. At a net income level, it was down 52% to THB 1.8 billion, again, fewer one-off gains compared to last year. Margin-wise, 34% from GOP, a strong increase at the same at a recurring EBITDA level. However, net profit margin fell to 7.6%. You can see the operating revenue breakdown in the chart with 68% from MOVE, 28% from MIX and 4% from MATCH. Cash flow snapshot. Starting cash, you can see the left-hand side THB 4 billion ending cash, THB 10.2 billion. So where did that THB 6 billion increase come from? What you can see mainly in the green cash flow from financing, THB 21 billion, if we include the others, which was also essentially financing cash flows, a THB 28 billion increase in cash from financing, mainly from 2 items. The first is net cash from debentures around THB 28.7 billion. And if you include VGI's RO, both components, about THB 13 billion increase from VGI RO, which is at the beginning of the year. To offset slightly through some repayment of short-term loans, $15.7 billion and a dividend payment of THB 4 billion. Those financing cash flows were mainly used for investment cash flows 3 key items: Pink and Yellow Lines, THB 5.8 billion, acquisition of financial assets, THB 4.5 billion and purchases of investments in joint ventures, which is the TNL investment of about THB 4.2 billion. Other than that, cash flow from operations, the bloom column, you see a drain of cash, THB 7.7 billion. But once we adjust that for 3 key items, it actually becomes a source of cash over THB 5 billion. The adjustment items are investment in the Pink or Yellow lines, which are classified the CFO of around THB 1 billion, net interest expenses of THB 4.7 billion and an increase in receivables relating to [ Euronet ] debt outstanding. So a further nonpayment by BMA of THB 8.5 billion. Now handing over to kun [indiscernible] for the MOVE business updates.

Thank you, kun Daniel. So now let me go through the segment performance starting with MOVE business. In this year, MOVE operating revenue was THB 12.3 billion, decreased by 41% year-on-year, mainly from the lower revenue from construction of the Pink and Yellow Lines of THB 8.6 billion due to the computing phase of the new Yellow lines development. However, the decline was partially offset by the higher O&M revenue of THB 530 million. The O&M this year was THB 6.8 billion, exceeding our target, mainly due to higher operating fee of the Green Line and the Gold lines. MOVE will book a share of profit from investment in BTSGIF of THB 390 million compared to a share of loss of THB 29 million in the previous year. This was due to the goal in the BTSGIF [indiscernible] on [indiscernible] supported by a remarkable 120% year-on-year. The increase in total kit as well as 2% year-on-year in [indiscernible] side. Moving on to MIX business. We booked operating revenue of THB 5.1 billion, an increase of 21% year-on-year. Majority of MIX revenue came from 3 key businesses. Out-of-Home home advertising, digital services and distributions. For Out-of-Home advertising, revenue significantly improved by 21% year-on-year to THB 1.9 billion, thanks to the improvement in all media segment under VGI. And in the fiscal year, the utilisation rate reached approximately 45%. Digital Services revenue also improved by 42% year-on-year to THB 1.7 billion, driven by an increase in insurance commission fee and higher lead generation from expansion of Rcare coupled with an increase in revenue from card sale and transaction fee or Rabbit Card. The last one, Distribution revenue was THB 1.5 billion. Remaining flat year-on-year due to lower sales from Fanslink, offset by the 9-month consolidation of SUPER TURTLE performance. In terms of profitability of MIX business as caught up sales with high 11% year-on-year. Gross profit in MIX business improved to THB 1.5 billion, increased by 45% year-on-year. And this year, a share of loss of VGI book, a share of loss from investment in Kerry, offset by a share of profit from investment in JMART. For MATCH business, we booked operating revenue of THB 640 million, a slight decrease of 2% year-on-year, mainly from lower construction revenue of THB 136 million. However, this was offset by an increase in rental and services revenue from the operation of Thana City Golf & Sports Club. And also we book a share of profit from investment in Rabbit Holdings of THB 515 million compared to a share of loss of THB 212 million in the previous years mainly due to the record revenue from the Rabbit Life, higher hotel revenue due to the recovery of the hotel business and gain from disposition of its properties. For financial position of the company as of March, the overall assets were value at THB 271 billion, increased 7% year-on-year. So the asset remains strong as we receive cash from sustainable link bond issuance and VGI like offering subscription and cash and liquid investment also remains strong at THB 21 billion, while the ajdusted net debt to EBITDA was 1.85x. This remains under an appropriate balance, and this indicate a healthy liquidity as well as capability to service short-term and long-term debt. Coming to our business update in this year, starting with MOVE business. For Pink and Yellow Line development, the construction of both lines is nearing the completion. The Yellow Line is set for full commencement in July. However, 2 days from now, the Yellow Line will be made available to Thailand, free of charge for the period of months. For the Pink Line, the operational commencement is expected in the beginning of the next year 2024. This 2 lines will generate new revenue stream through the farebox revenue and secure advertising revenue Additionally, it will help support our cash flow via the subsidies from the government. The first subsidy will be paid in 45 days after the full operation. For non-rail business, Intercity Motorway is on schedule and expect commencement by 2025. In addition, there is -- expecting earlier, M8 [Foreign Language]. We are exploring the opportunity to participate in this project. Now over there is an update on U-Tapao International Airport. Since contract signing in June 2020, we have been working on the master plan of the airport, and also negotiating key benefits and tactically with the government to make this airport more competitive. Additionally, we have recently signed an MOU with the Hong Kong International Airport to join hands and update the U-Tapao International Airport. Hong Kong Airport will serve us and one -- as one of the consultants for develop project in this airport by sharing know-how experience and technicality with us. And most recently according to the sale notification on 2019, there will be a capital increase in UTA from THB 4.5 billion to THB 15 billion. And with the BTS portion as 35% is require another THB 3.67 billion from BTS Group up to the COD. And now I would like to hand on to kun Nantarach to walk you through the business update.

Thank you, kun [indiscernible] So as you know, VGI has began our transformative journey to respond to the era of disruption since 2017. So today, VGI is the leading off-line to online with everything solutions, spanning across advertising, digital services or as you know, as the Rabbit Group and distribution, which comprise of SUPER TURTLE and Fanslink. So during the past 2 years, VGI was facing a very challenging time due to -- our financial performance was pulled back by the subsidiary which was in an expansion phase as well as the negative performance from other investments. However, VGI still strongly believe in our strategy, which will enable us to deliver a strong performance soon. From MIX business update, let me start from advertising business. In 2022/'23, VGI collaborated with the entertainment business products, such as PPTV HD36 who is the leading Thai television network and GMM Grammy, the leading of content provider to broadcast the contents such as daily news and entertainment content on VGI digital out-of-home platforms, covering over 3,500 screens within BTS Sky trains and office networks, across Bangkok and its vicinities. Moreover, we also launched trial run creative, the programmatic digital Out-of-Home, which is an innovation platform designed to meet the needs of advertisers based on selected audience personnel, criteria integrated with locations, time and weather. Move to the digital services. For digital services, Rabbit Care has continued to expand its itself since the establishment in 2013. Now Rabbit Care is one of the leading online insurance and financial products comparison platform in Thailand. In 2022/'23 Rabbit Care successfully raised around THB 700 million through the Series C funding, and this funding is expected to be used in the expansion of Rabbit Care business as well as strengthen its market share. Recently, Rabbit Care launch a CareOS technology, a proprietary IT system, the matching in trend and credit card products from all it's 70 business partners with the customers' needs within 30 seconds. Meanwhile, in 2022/'23 Rabbit Cash had outstanding loan around THB 100 million, including [indiscernible]loan of 70% and [indiscernible] loan of around 30%. Rabbit Car and Rabbit LINE Pay were also still continuing to grow its users. As of 31st March 2023, the number of Rabbit Card increased by around 8% year-on-year with 16.2 million card while Rabbit Line Pay of 10.4 million users, an increase of 9.5% year-on-year. And for the distribution business, after VGI invested in Nation International Entertainment or NINE, we also granted the rights to operate and manage retail and leasing spaces across 31 BTS Skytrain stations to them too. So therefore, NINE transformed itself to be a mass transit retail provider and also rebranded its corporate identity and logo as well as announced the new company name, which is the SUPER TURTLE Public Company Limited. Moreover, it also changed the security ticker symbol from NINE, N-I-N-E to TURTLE, T-U-R-T-L-E, which effect from 3rd May 2023. For SUPER TURTLE continued to expand the Turtle brand along BTS Skytrain network. Currently, SUPER TURTLE opened 6 TURTLE shops and 3 branches of Superich Turtle, which is the brand currency exchange service. Another component of all of this promotion business is Fanslink. So Fanslink still continuing to focus on developing its own brand, as its strategy that aim to improve its profit margin. Currently, Fanslink's own brand comprised of handle, providing tech devices and consumables. The second brand is WANAA providing CBD Beauty and health products. And the last one is EZhome, providing smart home gadgets. So all products are all available in both off-line and online channels. So next is MATCH business update, let me pass to Mr.[indiscernible] to update to you all. Thank you.

Thank you, kun Nantarach. Onto MATCH business update for this fiscal year. Firstly, you see the Financial Services, Rabbit Life has set a new total premium target of 2023 at THB 2.5 billion to THB 2.8 billion. And for the first quarter, only in 3 months, Rabbit Life already achieved 21% of the total premium target. Additionally, as part of Rabbit Holdings expansion, as kun Daniel mentioned before, Rabbit Holdings has announced its intention to invest 70% stake ownership in Prime Zone Asset Management. The total investment of this transaction is valued at THB 900 million. And of course, in transaction, that is expected in July 2023. And you might wonder who is Prime Zone. Prime Zone Asset Management consists of management team with expertise within the AMC business for more than 20 years. We started secure NPR in 2021, specializing in personal loan management that restructuring and adding value to assets acquired for NPA. Moving to asset disposition, Rabbit Holdings had achieved THB 5 billion from the disposal of its real estate assets in 2021 and 2022 and expect to receive additional THB 30 billion, which will we utilizes to support the growth of its financial services business. Lastly, we like to announce that the Unicorn, Phayathai has been successfully launched and is now available to the public. The Unicorn, Phayathai is a 51 level mixed-use building, promising top-notch ready-to-use amenities, comprising of hotel, rental and office. The project is located next to BTS, Phayathai and at [indiscernible] within connection to Don Muang airport and U-Tapao airport in the future. That's it for the BTS group business update, and I would like to hand over to kun Siriphen for BTSGIF financial performance and business update cover.

Good afternoon, everybody. Today, I will quickly say the financial performance of BTSGIF for fiscal year 2022/'23. Here I see the financial performance of the fourth quarter, which you can see clearly in this slide. [indiscernible] of fiscal year 2022/'23. Further income of the fund was THB 3.46 billion, up 266% year-on-year from the increase in income of investment in [indiscernible]. Total expenses of the fund were THB 62.8 million, down 10.3% year-on-year [indiscernible] for the Worldwide management fee and asset vessel expenses, being partially offset by higher reports expenses for capital return and annual general meeting. Net investment income was THB 3.4 billion, up 288% year-on-year. In this year, the fund recorded loss on investment of THB 110 billion. This resulted from the increase in this [indiscernible] fiscal 6% or 7% in response to an increase in the market this premium and the absence of the cash flow in fiscal year '22/'23 as time passed. However, this decrease was partially offset by an upward adjustment of the [indiscernible] in fiscal year '22/ -- in fiscal year '23/'24 and fiscal year '24/'25 attributed to a higher revenue growth rate compared with the previous forecast. Invest in net asset resulting from operation was THB 3.29 billion. This slide is the income for investment in NRTA. For the full year of fiscal year '22/'23, Farebox revenue was THB 5.4 billion, up 125% year-on-year from first, the increase in ridership by 120% year-on-year to 163 million trips from Thailand nationwide cessation of COVID-19 restrictions, as we currently increase in effective fare by 2.1% year-on-year to THB 32.9 per trip. The [indiscernible] effective fare increase in 1st January 2023. O&M costs were THB 1.9 million, increasing 32.8% year-on-year, largely from the increase in first, [indiscernible] from Rabbit Reward point cost and data analytics and marketing service fee, second, I mentioned an expense for rolling stock refurbishment study expenses and train overhaul expense. Third expenses from being placed FT cost and higher electricity consumption resulting from higher ridership and operating hours and fourth, employee expense from higher bonus payment, compensation and retirement expense for retired employees. Income from investment in NRTA was THB 3.5 million, increasing 266% year-on-year. Next slide is the balance sheet of the fund. As of 31st of March '23, total asset was THB 39.95 million. The main components were investment in NRTA are THB 38.63 million, increased by THB 860 million from 31st December '22. Investment in security and cash of THB 1.27 million, other asset THB 42 million. Total liability were THB 12 million. Net asset value was THB 39.93 million, equivalent to THB 6.8995 per unit. This slide is the core network performance. In the fourth quarter, ridership was 46.6 million trips, increasing 95% year-on-year and 1.6% Q-on-Q, mainly from the nation reopening of COVID-19 restriction. In addition, since 1st October '22, international tourist traveling to Thailand are no longer required to present vaccination documents or COVID-19 test results. This measure has contributed to a restoration of normalcy and resumption of daily life activity. Average weekday ridership was 573,000 trips, up 94.7% year-on-year and 3% Q-on-Q. Average fare in the fourth quarter was THB 34.1 per trip, increased 2.6% year-on-year and 5.6% Q-on-Q due to the effective fare increase in 1st January '23. This slide is the core network for band for fiscal year '22/'23. The ridership was 163 million trips, increased 120% year-on-year, mainly from the relief of COVID-19 situation. Average weekday ridership was 506,000 tips, up 120% year-on-year, which equivalent to 69% of people with ridership. Average fare was THB 32.9 per trips, increasing 2.1% year-on-year mainly for the effective fare increase since 1st January '23. This slide is the core network performance on annual basis. In fiscal year '21/'22, ridership was significantly affected by COVID-19 situation. However, in fiscal year '22/'23, the ridership has increased steadily. Total ridership in fiscal year '22/'23 equal to 69% of people with lower. However, ridership was softened in March and April this year from the special long holiday, support base and the pattern increase in January this year. This slide is the distribution summary. The fund announced the capital return for the fourth quarter of THB 0.182 per unit. Book closure date is on 12 June '23 and payment date is on 26 June '23. Total distribution in fiscal year '22/'23 is THB 0.587 per unit. This slide is still the business update, this 1st January 2023 on distanced-based increased the effective fare and promotion fare on BTS for line including [indiscernible] line extension between [indiscernible] station and [indiscernible] station as detailed in the slide. ` The effective fare increased THB 1 to THB 3 from THB 16 to THB 44 from THB 17 to THB 47 Senior Rabbit promotional fare received a maximum discount of 50% from the effective fare and the fare for 1-day pass or unlimited line increased from THB 140 to THB 150. Next slide. In addition, after BTSC has terminated the money card promotion on BTS card system and loss promotion through the Rabbit reward -- apology -- for passenger to earn bonus point from their journey with card effective from 1st November '21 to the 31st December '22. BTSC has extended the previous such promotion for another 1 year from January '23 to December '23 with the new point structure to align with the fare increase. There are extra point as a promotion during the first 3 months after the fare increase from then to [indiscernible] This revenue, it will be the normal price. For example, as [indiscernible] this will be previously 600 point, but 800 point during Jan to March '23 and 650 point during April to December '23 and used 645 point to redeem previous point. Next slide. Furthermore, BTSC has collaborated with Turtle 8 company, Ltd. BTSC subsidiary who offer money package that were sold on the Rabbit Reward application or XTreme Savings pack. The packet will -- the first one is XTreme Savings 35 rides as [indiscernible] we received which 23 -- 35 trips and special discount was THB 1,000 from participating shops for a bundle price of THB 1,200 for adult and THB 1,000 for student. The second one is XTreme Savings Lite 15 rides. As we 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. This package was until 31st of March '23. And afterwards, BTSC and T8 offer 3 new package. The first one is XTreme Savings 15 rides. Customers will receive BTS coupon 15 trips and special discount coupon worth THB 300 for a value price of THB 630 for adult and THB 610 for student. Second one is “XTreme Savings 35 Rides”. Customer will receive BTS coupon 35 trips and special discount coupon worth THB 600 for a bundle price of THB 1,320 for adults and THB 1,240 for student. And the third is XTreme Savings 25 rides”. Customer will receive BTS coupon 25 trips and special discount coupon worth THB 400 for another bundle price of THB 1,020 for adult and THB 990 for student. This package provide additional option for customer to get discounted fare and special discount coupon. That's all for BTSC.

For full year 2023 as well as 24 guidance, BTS Group, starting with more guidance, we set a revenue target of THB 6.9 billion from O&M revenue for the Green Line expansions and THB 2.9 billion from construction revenue of the Pink and Yellow Lines, including THB 1.8 billion for Pink Line and THB 1.1 billion for the Pink extension line. For mass transit related income, we set a target of THB 5.2 billion, and the CapEx from MOVE business is expected at THB 3.1 billion. The majority is set for the Pink and Yellow Lines. In terms of ridership, we expect total ridership of 240 million to 250 million trips, and EPS of approximately 50% year-on-year. With expected average weekday ridership of 700,000 to 750,000 trip per day. Additionally, we expect that every [indiscernible] will be allow THB 35 per trips. For MIX, we said THB 6 to THB 6.5 billion from VGI business, an increase of 25% to 35% year-on-year, mainly driven by the growth across all business unit. Out-of-Home advertising is expected to see the utilization in the lens of 55% to 60%, factored by an increase in BTS ridership. Digital services will be driven by the core from Rcare and Rcare's business expansion and more project management and card related revenue. For distribution More TURTLE shops, will help both core up revenue for VGI distribution business. In addition, net profit margin is expected to exceed 10%, and VGI is set the CapEx of THB 1.1 billion. For MATCH business, we set the target of THB 5.2 billion, mostly for our new office headquarter. Before concluding the presentation, I would like to hand it over to kun Daniel to give you all the full year 2023/'24 guidance outlook.

Thanks. Siri. Rounding off the presentation, we have strong reasons to be optimistic for the upcoming fiscal year. COVID has been downgraded across most of the world to be a common respiratory disease now. Economic growth is on a consistent uptrend. Within Thailand, we're looking at 3.5% GDP growth, about 3% private consumption expenditure growth and 2% private investment growth. Inflation is normalizing after a volatile year, which makes planning a lot easier. Very importantly, following the last month's election, we see a political progress with a coalition formed and an MOU signed. Some hurdles do remain, but we are hopeful of government being in place within August of this year. On the cards this year, there's also a very strong cash flow rebound for the group, driven primarily by the Pink and the Yellow line subsidy from the beginning of operations, around THB 4.7 billion per annum. Thus, we're hopeful on resolution of the outstanding O&M debt. And coupled together with an ongoing economic recovery to our core businesses of rail, whether it's Pink, Yellow and Green Line as well as the Out-of-Home media business. And with that, I think I'll hand over to kun [indiscernible] to look after the Q&A. Thank you.

Many thanks, kun Daniel. Now let's conclude the presentation.