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

Good afternoon, and welcome analysts and fund managers to BTS Group and BTSGIF Second Quarter of 2023/'24 analyst meeting. As usual, we are joined by the management team, starting from Khun Kanjanapas, CEO of the business; Khun Daniel, CIO and IR Head of BTS Group; Khun Chawadee, CFO of BTS Group; Khun Soraya, our CEO and acting CFO of Rabbit Holdings; Khun Sayam, Chief Legal Officer of BTS Group; Khun [Indiscernible] Treasurer of BTS Group; Khun Sinatta, Director of IR and SE; Khun Siriphen, Fund Manager of BTSGIF; and last, but not least, familiar faces of IR team members from BTS Group, BTI, Rabbit Holdings and Thanulux. [Operator Instructions]. As we will open the floor for Q&A once the presentation has concluded. Next, I would like to hand over to Khun Daniel to recap on the second quarter of 2023/'24 business highlights and financial performance.

Thank you very much. Welcome, everybody, welcome. Nice to see you again, and welcome to the second quarter presentation starting off with the business highlights. It's been a very active and a very positive year-to-date for the MOVE business, starting with the Pink and the Yellow lines. A reminder that these are our 30-year concessions, which have also downside protection and less sensitive to ridership sensitivity than some of the previous agreements due to the subsidy. The Yellow line commenced full operations in July 2023, and we already received the THB 2.5 billion on the first subsidy. The Pink line is now expected to commence commercial operations in December of this year, with a THB 2.2 billion subsidy received in the first quarter of next year. In the non-rail segment, we signed a joint venture with Bangchak subsidiary Winnonie to help us serve first and last mile passengers. And most importantly, in relation to the E&M outstanding debt, this is now in the process of BMA's execution, and we are expecting the repayment of THB 23 billion in debt early in 2024. On the MIX side, the team will update you with continued expansion efforts across advertising with new inventory on the Turtle platform across RCare where we have seen overseas market expansion and our RCash where we've seen loan balance growing further, also within the distribution sector, where Turtle super-rich Turtle branches have expanded furthermore. Within MATCH, Rabbit Holdings, BTS Group recorded a much narrower share of loss Q-on-Q following no more losses or impairment relation to Singer. Further, they expanded more into financial services through an investment or a potential investment in Metha Asset Management. Finally, on P&L, BTS Group recorded a share of profit of THB 115 million on the back of a strong operational performance. Now moving on to the financial highlights. Profit and loss side. Operating revenue fell 13% to THB 3.9 billion. Recurring EBITDA, up 19% to THB 2 billion with a healthy EBITDA margin of 51%. Net profit was softer, however, at THB 260 million, down 46% year-on-year. Our balance sheet remains well managed with cash and liquid investments at the end of the quarter of THB 90 billion. Adjusted net debt D/E of 2.12x, but if we exclude the government receivables, this is a 1.41 net debt to equity ratio. [indiscernible] continues to show financing cash flows for investment, servicing, investment cash flows and operational cash flows, but we can go into the details a bit later on. So I'll skip now on to the overview of the income statement. Starting with operating revenue. Operating revenue was down 13% to THB 3.9 billion. You can see the attribution in the bottom right-hand chart, THB 488 million reduction from MOVE, THB 108 million reduction from MIX and pretty much no change on the MATCH. While this chart doesn't show is the increase in interest income, which grew 42% or THB 400 million to about THB 1.35 billion. And that's the reason why we see or -- one of the reasons why you Turtle revenue actually grew 2% to THB 6 billion in the quarter. Recurring EBITDA, as mentioned, up 19% to THB 2 billion. And despite strong Q-on-Q improvement in the net profit, net profit was, I say softer at THB 257 million on high SG&A and financial costs. Margins -- gross margin, 34%, recurring EBITDA margin, 51%, both very healthy margins, but the softening of the net profit margin to around 4%. In terms of the revenue breakdown for the quarter, you see that MOVE is 67% of revenue, and MIX 30%. Now on to the 6-month cash flow. Starting cash of THB 10 billion, ending cash of THB 7.7 billion. Audited cash flow from operations was a drain of cash of around THB 2.8 billion. But as you know, we'd like to adjust those -- that CFO amongst other items, the receivables relating to O&M debt outstanding as well as net interest expense and some investment on the Pink and Yellow line. If we adjust that adjusted CFO is a positive source of cash of around THB 5 billion. Also, cash flow from financing was a positive source of cash of THB 3.8 billion, which you can see was mainly from drawing down some long-term and short-term financing. These cash flows will be used to invest in the purchase of investments in subsidiaries, mainly VGI of 2.8, a dividend payment earlier on in the year of THB 2 billion, and on the investment side, Pink and Yellow line investments THB 1.8 billion and further investment in UTA of around THB 1.3 billion, which left us with a net ending cap of THB 7.7 billion or including liquid investments around THB 19 billion. Now handing on to [Indiscernible].

Thank you for Daniel [Indiscernible]. As usual, we begin the second half of [Indiscernible] Move business. In second quarter 2023/'24 our operating revenue was THB 2.6 billion, decreased by 16% year-on-year, [indiscernible] mainly from two main factors. The first one, no recognition of Yellow line construction revenue after commercial operation since third of July this year. The second one was lower recognition of construction revenue from the Pink line reached by 18% year-on-year or THB 159 million year-on-year to THB 745 million. Nevertheless, the decrease was partially offset by a recognition of farebox revenue from the Yellow line of THB 850 million, coupled with the higher revenue of THB 83 million year-on-year. Turning to the cost side. The cost of more revenue decreased by 20% year-on-year to THB 1.6 billion from [Indiscernible] construction of the Pink and Yellow lines. As a result, gross profit margin in this quarter improved to 40%. And in this quarter, we also booked a share of profit from investment in BTSGIF of THB 182 million. This marked a substantial increase of 85% from the same quarter last year, is driven by the steady growth in ridership and increase in average pay. Consequently, recurring both EBITDA show improvement, mainly contributed by higher mass transit-related interest income and a higher share of profit from our investment in BTSGIF. Moving on to MIX business. For this quarter, MIX operating revenue decreased by 8% year-on-year to THB 1,176 million. The majority of MIX revenue come from key businesses. Advertising, digital services and distribution. Advertising revenue show a 6% year-on-year improvement to THB 459 million as a consequence of growth in all [Indiscernible]. The utilization rate was about 44% in this quarter. Digital services revenue also improved by 8% year-on-year to THB 478 million, offset by lower lead generation from RCare. The increase in digital services revenue was driven by higher revenue from [Indiscernible]. For distribution business, revenue amount to THB 39 million, declined by 41% year-on-year from the sales in product MIX of Fanslink, offset by an uptrend in revenue from retail business of Turtle. In terms of cost of sale of MIX business, cost of sales dropped by 6% year-on-year. As a result, we recorded gross profit margin or MIX business of 25.9%. Additionally, in this quarter, we recorded a share of loss from investment in Kerry of THB 196 million. However, we also booked a share of profit from investment in JMART of THB 17 million [indiscernible] compared to the previous quarter. Within MATCH business, operating revenue in the second quarter of this fiscal year was THB 140 million. [Indiscernible] a slight decrease year-on-year due to lower construction revenue from HHT Construction Company debt of THB 14 million. However, this decline was partially offset by an increase in rental and service revenue of THB 12 million from Thana City Golf & Sports Club operation. In addition, during this quarter, we recognized a share loss from investment in Rabbit Holdings of THB 210 million compared to share of loss of THB 130 million in the second quarter of last fiscal year. The higher loss was driven by the first one, recognition of impairments of hotel asset in Europe and the second one unrealized loss on FX. However, we got share of profit from investment in Thanulux of THB 115 million in this period. This was a result of Thanulux business expansion and the recognition of disposition of ordinary share of 2 JVs under Thanulux Alliance Company Limited to PROUD Real Estate. Moving on to financial position. Total assets as of 30 of September 2023 stood at THB 252 billion, an increase of 2% from 31st of March 2023. The increase was mainly due to a THB 3 billion in [government receivable]. Cash and liquid investments continue to [Indiscernible] at [THB 19 billion]. The adjusted net debt to EBITDA stood at 2.1x from the net debt of THB 162 billion. This led to [Indiscernible] manageable. And as [Indiscernible] out [government receivable] is adjusted net debt to EBITDA was reduced to 1.4x. Coming to the last year update on the financial part. In this month, November 2023, BTS Group [particularly] issued debenture valued at THB 15 billion with rating of A negative and stable outlook by [TRIS] to the institutional and public investors. The debenture consists of 4 tranches with an average coupon of 4.25%. The proceed from this issuance will be used for the debt repayment. Now I would like to hand it over to [Indiscernible] to walk you through [Indiscernible] update.

Thank you, Khun [Indiscernible] As for the business update in this quarter, let's begin with our MOVE business. For the rail business, the development of our Pink and Yellow lines demonstrates a favorable progress. As such Yellow line began its commercial operations on 3rd of July 2023, EBM, the Yellow line [Indiscernible] our subsidiary has already received the first government subsidy installment of THB 2.5 billion in mid-August 2023. Regarding with Pink line updates, the construction of the Pink line is reaching the tail end with 98% of the project completion, while progress on the Pink line extension is underway currently at 33%. Within this month, we can anticipate [Indiscernible] free public trial rides on 21st of November and commercial commencement on 18th of December 2023. In addition to that EBM, the Pink line [Indiscernible] is entitled to receive the first subsidy payment within 45 days after its commercial operations, expecting to receive in the first quarter of 2024. These 2 lines will help generate new revenue streams through long-term farebox revenue and secure our advertising revenue. Moving on to the non-rail business update. Our [indiscernible] project is still ongoing in which we expect [Indiscernible] in 2025, as well as U-Tapao International Airport. Since contract signing in June 2020, our focus has been on developing the market plan of the airport. Currently, we are working with the Royal Thai Navy and [Indiscernible] on both, the airport and airport city master plans. Also, we are in the stage of finalizing key benefits and tax [Indiscernible]. In line with this, we are further negotiating with the [Indiscernible] measures due to the impact of COVID-19 pandemic. Moreover, in this quarter, BTS Group paid the increase registered capital amount of THB 919 million, representing 25% of total increase in U-Tapao International Aviation. As we look ahead, we anticipate receiving the notice to proceed to commence our construction by mid-2025, coinciding with the high-speed railway construction. And last but not least, for our non-rail business updates, BTS Group has incorporated Smart EV Bike Company Limited as a new joint venture with BTS Group for 67% of its share and the remaining 33% held by Winnonie. The joint venture purpose is to operate EV-bikes hire purchase business for registered motorbike drivers within 2.5 kilometers of BTS stations. The initial capital is THB 20 million, and additional injection will be made gradually according to the development of this project. The source of fund is the working capital. This investment will help expand our door-to-door services through first and last mile journeys for BTS passengers and eventually become the main [Indiscernible] for our BTS network. Moreover, there is an opportunity to pioneer the motorcycle taxi market supported by Winnonie. Nevertheless, Smart EV Bike will enhance urban sustainable mobility network, with an annual 50% reduction in carbon footprint compared to the conventional diesel-powered motorcycles. The right-hand side, as you can see, will be a summary you see more clearly why we invest with Winnonie and establish the Smart EV bike. The main strengths of Winnonie lie in its expertise in EV Bike business with experience in operations. And on top of that, Winnonie has a strong backup from its major shareholders. In terms of BTS benefits, the Smart EV Bike aims to enhance the convenience of our business passengers while offering sustainable transportation option. As a business model summary, Winnonie will serve as EV bike supplier and overseeing the operations that include swapping stations, customer services and maintenance. So by establishing Smart EV Bike, this joint venture will mainly focus on acquiring motorcycle taxi drivers and offering the EV bike hire purchase [Indiscernible]. As for motorcycle taxi driver benefit, our EV bike namely [Indiscernible] economic savings package, which aim to reduce their expenses by around 50% per month. Regarding our mid-year target, soft launch starts from mid-November and target to acquire 300 bikers and set up 6 swapping stations at our core line network by the end of this year, and we are aiming to acquire 10,000 with a [cycle taxi] driver between 2028. Now I would like to hand over to Khun Nantarach for MIX business update.

Thank you. For MIX business update, starting with the Advertising business, VGI collaborated with Turtle on new media package, namely Turtle LED, combining all 59 digital screens at the front of Turtle Shop on 15 BTS stations. And this package will increase VGI's media capacity and also will enable Turtle to promote their products and draw attention of the BTS [Indiscernible]. For digital services business, as [Indiscernible] mentioned that VGI recorded gain on disposal of investment in this quarter. This gain is mainly from the disposal of private line pay on 31st August 2023, [Indiscernible] shares to Line Man Thailand and Line Company Thailand. This decision was prompted by intensified competition within the parent market and the surge in competition was driven by the introduction of prompt pay service and the rapid expansion of other contenders in the market. For Rabbit Care, it has expanded its footprint into the Vietnam and Singapore market by incorporating new subsidiaries under Rabbit Care Vietnam Limited Liability Company and Rabbit Care Singapore PTE Ltd. These new subsidiaries will replicate Rabbit Care's business model in Thailand by providing online insurance and financial product comparison services to new customers. Moreover, it's also broadened -- it also broadened its presence in the car insurance brokerage sector through the acquisition of EasyCompare Thailand Company Limited broker business. This will enable Rabbit Care to access over 30,000 active clients and at least 400,000 users. Meanwhile, as of September 2023, Rabbit Cash has outstanding loan of THB 474 million, significantly increased from the previous year with the contribution from [Indiscernible] 74% and [Indiscernible] 26%. At the same time, Rabbit Card also reached 16.9 million cards, an increase of 8% year-on-year. Moving to the last one, Distribution business. So Turtle continued to expand its service and also made significant progress on the refurbishment of the merchandising space on BTS stations. Currently, Turtle operating 16 Turtle shops, 5 branches of SuperRich Turtle across BTS network. And moreover, Turtle has successfully completed the refurbishment of over 20 BTS stations. And it's all for MIX business update. Next its MATCH business update. Let me hand over to Mr. Kisada.

Thank you, [Indiscernible]. Moving on to the MATCH business updates. For the third quarter of 2023, Rabbit Holdings announced its intention to acquire a 50% shareholding in Metha Asset Management through its wholly owned subsidiary, RBH Ventures at the total purchase price of THB 70 million. More information on our Metha Asset Management is that they are a licensed private fund management company in Thailand founded in 2022. Its strategy is investing for long-term value, focusing on great long-term sustainable earnings power and values. The source of funds allocated for this transaction will be from the company's working capital and loans with a target closing date to be completed within November of this year. Additionally, Rabbit Holdings has and built a new project with [Indiscernible] development under the [Residence 38]. It is an upscale residential project located in Bangkok District [Indiscernible]. The building consists of 37 stories, which is a combination of service apartments, a residential condominium and F&B floor. The expected completion period for this project will be within 2025. Some of the project highlights include [Indiscernible] the developer to oversee the construction, development and the sales of this project. The first half of the building from Level 13 to Level 24 will be a service apartment operated and managed by [Indiscernible] and on the upper half of [Indiscernible] level 25 to 37 will be a residential condominium under the name Residence 38. The total project cost is valued at THB 4.9 billion, a THB 2.5 billion already invested into the project. An additional THB 2.4 billion remains. The source of funds are a combination of bank loans and shareholder loans. Moving on to next [Indiscernible]. Since late 2022, Thanulux added 3 growth engines, which include [Indiscernible] business, secured lending and property development. With these 3 businesses and their synergistic ecosystem, Thanulux believes the strategic business position is poised to strengthen its business portfolio and generate long-term value for shareholders. Additionally, Thanulux issued 2-year fixed debentures, which is well received, that they have to exercise the green shoot option, further validating the investor confidence in Thanulux strategic business expansion. This concludes BTS Group's Second Quarter 2023 Analyst Meeting. I would like now to pass it to [Indiscernible] who will take you through BTSGIF second quarter performance. Thank you.

Good afternoon, everybody. Today, I will present the financial performance of BTSGIF for the second quarter of fiscal year 2023/'24. In the second quarter, total income of the fund was THB 1.22 billion, up 42% year-on-year and 17% Q-on-Q. The increase came from the income from investment in the farebox revenue, which increased to THB 1.21 billion, rising by 41% year-on-year and 17% Q-on-Q from the [Indiscernible] 4%. Total expenses of the fund were THB 17.7 million, increasing 30% year-on-year, largely due to the lower expense in the prior year, resulting from the removal of provision for incentive fees. When compared to the previous quarter, total expenses increased by 8% Q-o-Q, primarily due to the [indiscernible] capital return at annual general meeting. Profit from net investment was THB 1.20 billion, up 42% year-on-year and 17% Q-on-Q. In this quarter, the [Indiscernible] loss from investment of THB 1.43 billion. This resulted actually from the decrease in the remaining [Indiscernible] the revenue under [Indiscernible] the increase in [Indiscernible] according to an increase in [Indiscernible] increased to 7.1% as of 30 September 2023 from 6.7% as of 30th of June 2023. Changes in net asset resulting from operation was minus THB 225 million. Next slide is the income from investment in NRTA. In the second quarter, farebox revenue was THB 1.7 billion, up 30.4% year-on-year and 10.6% Q-on-Q. Year-on-year increase came from the ridership growth of 23.6% to 49.7 million trips from the relief of COVID-19 situation and the increase of 5.4% from the Effective Fare increase since 1st January 2023. Q-on-Q increase was mainly from 10.7% increase in ridership due to a higher number of weekdays. O&M cost were THB 480 million, up 8.8% year-on-year, but down 2.8% Q-on-Q. Year-on-year increase came from the increase in [Indiscernible] expense from data analytics and marketing service fee and rabbit reward point cost. And second, utility expenses from higher FT cost in electricity expense and security expense, but partially offset by lower employee expense from lower compensation and retirement expense for retired employees. Q-on-Q decrease was led by the decrease in employee expense from bonus payment, but partially offset by higher selling expense for higher data analytics and marketing service fee and rabbit reward point cost. Income from investment in NRTA was THB 1.22 billion, increasing 41% year-on-year and 17% in Q1. Next is first half performance -- skip this one and go to the statement of financial position. Order statement of financial position as of 30th of September 2023, total assets were THB 38.41 billion. The main components were investment in NRTA of THB 36.9 billion, decreased by THB 1.43 billion from 30 of June '23. Investment in security and cash at bank THB 1.3 billion, and other asset of THB 200 million. Total liabilities stood at THB 13.9 million. Net asset value was THB 38.4 billion, equivalent [THB 6.6345 billion]. Other Core Network performance. In the second quarter, ridership was 49.7 million trips, increasing 23.6% year-on-year, primarily resulting from the relief of COVID-19 situation. This caused more people going back to work at the office and doing more activity. Compared to the previous quarter, ridership growth by 11% Q-on-Q mainly from weekday in this quarter, as in the previous quarter, there were several holidays [Indiscernible] festival and [Indiscernible] ridership was 600 and 4,000 trips, up 22.3% year-on-year and 6.9% Q-on-Q. Average fare in the second quarter was THB 34.1, increasing 5.4% year-on-year due to the Effective Fare increase since 1st January 2023, but decreased by 0.3% Q-o-Q. For the first half, ridership increased 33.4% year-on-year and average fare increased 5.4% Q-on-Q -- year-on-year. Next slide is the Distribution. The fund [Indiscernible] the capital return for the second quarter was THB 0.208 per unit. Book closure date is on November 27, 2023, and payment date is on 12 December 2023. Total Distribution [Indiscernible] THB 6.622 per unit in the form of dividend of THB 4.342 per unit, and capital return of THB 2.285 per unit. For the business update, the monthly package. [indiscernible] with Turtle [Indiscernible] subsidiary to offer monthly package that will [indiscernible] application. [Indiscernible] XTreme [Indiscernible] 30 October 2023 reached [indiscernible] 15 trips and special discount coupon worth THB 300 for a price of THB 630 for adult and THB 610 for student. The second one is XTreme Saving 25 ride [Indiscernible] 25 trip and coupon of THB 400, from price THB 1,020 for adult, and THB 990 for student. The third one is XTreme Savings 35 Rides. Customer [Indiscernible] BTS coupon of 35 trips and discount coupon of THB 600 for price of THB 1,320 for adult and THB 1,240 for student. The new package, starting from 1st November 2023, BTS [Indiscernible] to offer various new money package. This package provided additional option for customers to get discounted fares, special discount coupon. They are first XTreme Savings 15 rides, customer receive [discount coupon] 15 trips at [Indiscernible] discount coupon worth at least THB 300 for a price of THB 555 for adult and THB 450 for student. The second one is XTreme Saving 25 rides, [indiscernible] 25 trips and discount coupon of THB 400 for the price of THB 875 for adult and THB 700 for student. The last one is XTreme Saving 35 rides, customer will receive with this coupon 35 trips and discount coupon of THB 600 for the price of THB 1,155 for adult and THB 910 for student. We expect that the new package will increase the ridership and farebox revenue to BTS. Next slide show the detail of the discount coupon for participating, for [example, Turtle and Lawson] and other [Indiscernible] you can see the detail in the slide. [audio gap]