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

Good afternoon, and welcome analysts and fund managers to BTS Group and BTSGIF Third Quarter of 2023/'24 Analyst Meeting. As usual, we are joined by the management team, starting from Khun Kong Chi Keung, Deputy CEO of BTS Group; Khun Surapong, CEO of MOVE business; Khun Chawadee, CFO of BTS Group; Khun Soraya, acting CEO and CFO of Rabbit Holdings; Khun [indiscernible], treasurer of BTS Group; Khun Sinatta, Director of IR and SE; Khun [indiscernible] Financial Controller; Khun Siriphen, Fund Manager of BTSGIF. Last but not least, familiar faces of IR team members from BTS Group, BTI, and Rabbit Holdings. [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 Sinatta to recap on the third quarter of 2023/'24 business highlights and financial performance.

Also a happy afternoon, everyone, and welcome once again to the third quarter results wrap-up from BTS Group. As usual I would like to highlight the key existing highlight of the company over the first quarter up to now within our MOVE business, we can see an ongoing active and positive year-to-date performances. From starting with the pink and yellow lines, just to gently remind once again that these 2 lines on the first [indiscernible] highlighted -- we built these 2 lines of the 30-year concession contract outside protection. The government will help subsidize some of the construction investments through a cash subsidy repayment for the first 10 years, 10 years of operation. And after commencing full operation of the Yellow line since July last year and followed by pink line which the full commercial runs starting this month. We are now recognizing Farebox revenue by the ticket sales from word lines. As mentioned earlier, we already received the first payment of the subsidy of both lines are THB 4.75 billion and we will continue receiving the subsidy in the next 9 years from now. For non-rail side, BTS joined hands with the subsidy of Metha Company launched the Pinto as an e-commerce e-motorcycle taxi to serve the first mile last mile journey for our BTS passengers. Unfortunately, on the MOVE, the outstanding E&M and on in debt matter, the bank of Metropolitan Council has already approved a budget of THB 23.4 billion, for the E&M debt related to the Greenline Extension 2 in this month, and we expect the cash payment of this E&M debt very soon and followed by the repayment of the O&M debt [ almost ] some time in this year. Moving on to the MIX side, the IR team will review you in more details under the advertising business, MACRO, our associates rebranded and changed this name to ROCTEC with the aim to become a leader in transformative innovation and communication solutions sector. Also RCash under BTI Digital Services BU, the loan balance grew further. And lastly, listening the distribution business. Turtle shop has expanded furthermore in BTS Station. Within MATCH Rabbit Holding, our associate expanded more in financial services business through a completion of 50% investment in the private management company called Metha Asset Management. And lastly, on the BTS Group side, last week on the 14th February BTS Group Board of Directors meeting approved not to paying interim dividend. And also the announcement of the restructure of VGI stakeholding, which now all VGI shares under the Group is held by BTS Group with the aim of enhancing the efficiencies in implementing the 3M strategy and increasing the flexibility through flexibility in internal management. Moving on to financial highlights. Next slide. On the profit and loss side, this quarter, revenue improved with total operating revenue increased by 10.6% year-on-year to THB 5.1 billion, driven by higher operating revenue from our 3 end businesses. Recurring EBITDA, THB 2.2 billion, up 18% year-on-year from MIX and MATCH from finances. The company recorded a net loss of THB 4.7 billion, shifting from this impact of nonrecurring items with commissions supporting the report of the noncash impairment losses from our investment portfolio and together with the higher finance cost. However, if we exclude the onetime items, the company still generated a net profit of THB 144 million in this quarter. Regarding the balance sheet, it remained well managed with the cash and liquid investment of THB 20.4 billion, adjusted net debt-to-equity ratio stood at 2.47x. But if we exclude the receivable debt to the government side, the adjusted net D/E ratio will be improved 1.63x. The cash flow of the company financing cash, mainly earmarked for investment in MOVE and MIX side, details will be provided later. And moving on to the overview of the income statement. Total operating revenue assay grew 11% year-on-year from current of revenue from MOVE, MIX and MATCH, you can see the revenue breakdown from the pie chart in front of you, 57% generated some MOVE, 28% from MIX and the remaining 5% from MATCH. And the year-on-year change showed in the waterfall chart at the bottom right, MOVE revenue at 11% year-on-year. MIX expanded by 5% and MATCH revenue grew by 49% in year-on-year. Back to the gross operating profit expanded 8% year-on-year to stand at THB 1.6 billion. However, recurring EBITDA, as mentioned, up 18% year-on-year to THB 2.2 billion from the weak performances from MIX and MATCH. Looking at the bottom line, the reported net loss was THB 4.7 billion in this quarter. This was mainly impacted by the record of the noncash impairment losses from our investment in [ carried spread Thailand ] impairment losses from investment in Singer at the Rabbit holding level, but we see the share of loss from Rabbit together with higher value support. However, if we exclude the nonrecurring items, we still represented the adjusted net profit of THB 144 million, an improve of 20% from prior quarters. At the margin side, gross operating profit margin at 32% remained flat from last year. Recurring EBITDA margin of 45% was still at [indiscernible] margin, yet a soft margin of recurring net profit margin of 2%. Moving on to the 9 months cash flow of the company, starting with the beginning cash of THB 10.3 billion, ending cash at around THB 9.2 billion. The operating cash, a drain of cash of around THB 6.7 billion. But if we adjusted the CFO, mainly with a receivable related to the OEM debt of around THB 6.4 billion net interest expense and some investment in pink and yellow line, we would have a positive product cash from operating of around THB 5.6 billion. Also for the cash flow from financing, the positive cash flow of THB 8.3 million. As you can see, it was mainly from an issue of debenture of the company and a droup-out of short term and long-term financing. But then this was due to pay for investment in subsidiaries, the VGI and TURTLE, THB 4.3 billion and used to pay dividend of around THB 2 billion in August last year. For the investment side, we still invest in the pink and yellow line of around THB 2.5 billion and also investment in the IP investment property, THB 1.9 billion and further investments in the product [ in Spain ] THB 1.3 billion, which as a result left with the company in cash of THB 9.2 billion. This would exclude another THB 11.2 billion of cash and liquid investment as of December last year. We have in actual business update with the IR team [indiscernible].

Thank you. Hi and good afternoon, everyone. As usual, let's begin the second performance with the MOVE business. In the third quarter 2023/'24, our MOVE operating revenue was THB 3.4 billion, improved by 11% year-on-year. The increase was supported by 3 key factors. Only, we experienced a significant increase of 75% year-on-year to THB [ 1.5 ] billion in construction revenue from the pink line due to the acceleration of the construction completion. Secondly, we recognized farebox revenue amounting to THB 126 billion from the yellow line. And thirdly, our O&M revenue saw a steady growth increasing by 6% year-on-year to THB 1.8 billion. Nevertheless, the increase was partially offset by no recognition of yellow line construction revenue after commercial operation since third of July last year. Turning to the cost side. The cost of most revenue increased by 23% year-on-year to THB 2.4 billion from higher construction cost of the pink line as well as recognition of costs related to the yellow line commercial operation. Consequently, more gross profit margin in this quarter stood at 30%. Furthermore, in this quarter, we also booked a share of profit from investment in BTSGIF of THB 192 million. This marked [ indiscernible] 88% increase from the same quarter last year. It was driven by the growth in leadership and increase in every effect. Moving on to the MIX business. MIX operating revenue in this quarter showed an increase by 5% year-on-year to THB 1,452 million. Advertising, digital services and distribution continue to stand as the key businesses within the mix revenue. In the third quarter, advertising revenue was THB 587 million flat year-on-year, mainly from a decrease in office & other media revenue, offset by a surge in Transit media. And in this quarter, the utilization rate was 56.5%. For digital services revenue is improved by 35% year-on-year to THB 576 million. This momentum was driven by enhanced service revenue from Rabbit Rewards, higher revenue from project management fee as well as more interest income from digital lending business managed by Rabbit Cash. For distribution business, revenue amounted to THB 289 million, declined by 24% year-on-year due to the change in product mix of Fanslink, partly offset by an increase in revenue from retail business of TURTLE. Regarding the cost side, cost of sales dropped by 14% year-on-year. This led to a significant import in gross profit from MIX business of 43.1%. Additionally, in this quarter, we record a share of loss from investment in Kerry of THB 253 million. However, we also booked a share of profit from investment in ROCTEC of THB 40 million. Within MATCH business, we saw an impressive total operating revenue of THB 271 million in the third quarter of this fiscal year. Marking a significant 49% year-on-year increase, mainly from higher construction revenue of THB 84 million from HHT Construction Company Limited. However, during this quarter, we recognized a share loss from investment in Rabbit Holding of THB 834 million compared to share profit of THB 497 million in the third quarter of last fiscal year. The last was attributed by the first one, the recognition of impairment loss on Rabbit Holding investment in SINGER. And the second one, the absence of the recognition from the disposition of Rabbit Holding properties. Now I would like to hand over to Khun Thunsini to walk you through the financial statement and provide an update on our MOVE business.

Thank you, Khun Yada. Let's moving on to the financial position. Total asset as of 31st of December 2023 stood at THB 274 billion, an increase of [ 1.0% ] from 31st of March 2023. Increase was [indiscernible] from an increase in receivables related to the railway [indiscernible] of THB 7 billion. Cash & liquid investment continued to exhibit strength at THB 20 billion. Total liabilities stood at THB 206 billion, an increase of 8.8% from 31st of March 2023. The increase mainly from an increase in long-term debentures of THB 6 billion from issuance of [indiscernible] debentures of THB 16 billion last year, extracting the repayment of debentures amounting to THB 9 billion. Adjusted net debt to equity stood at 2.47x from the adjusted net of THB 167 billion. This ratio is still properly managed and as Khun Sinatta mentioned earlier, if excluding Government receivable will bring the adjusted net debt to equity down to 1.63x. This indicates a healthy range of liquidity. As far the business update in this quarter, let's begin with our MOVE business. Within the rail business, the development of our pink and yellow lines demonstrate a favorable forecast. For the yellow line, we just launched a really promotional package on February 1, 2024. BTS passengers can now enjoy pink trip for THB 250. This will be across all 23 stations from [ Lat Phrao Samrong ] stations. This promotion is available from first of February until April 30, 2024. This aims to attract more rider and also boost average yellow line ridership as well. Regarding the pink line update. After several years of construction, the pink line monorail began its full commercial operations on February 1, 2024 and the [indiscernible] the blue line [indiscernible] our subsidiary has already received the first government subsidy installment of THB 2.25 billion on January 31, 2024. Whereas the forecast on the pink line extension is underway. With 40% of the project construction completion and we expect to commence its commercial operations within 2025. For these 2 lines will help generate new revenue stream to long-term farebox revenue over 30-year concessions and also secure our advertising revenue. So this is all from MOVE business in this quarter. Now, I would like to have a lot of [indiscernible] from MIX business update.

Thank you [indiscernible]. For MIX Business Updates, starting with advertising business. So for which I recently hosted for VGI media effectiveness, 2024 events, where the -- unveiled the marketing strategy is grounded in marketing 6.0 principles for the era of immersive marketing, specifically designed to navigate the complexity of the era of immersive marketing and insight from BTS commuter survey. So this event was able to gather participation from over 300 persons representing media agency and permanent brands. In addition, VGI has expanded media inventory by incorporating Street Furniture media into new locations, including St. Luis and Plan Chit BTS stations. And this collection of media includes over 28 digital screens and lightboxes, which enhance the reach and impact of VGI's advertising capabilities. So next is digital services business. As of 31st December 2023, Rabbit Cash has outstanding loan of THB 659 million, significantly increased by 30% year-on-year with the contribution from Nano loan of 74% and Welfare loan of 26% as well as Rabbit Card also reached 17.4 cards -- oh sorry, 17.4 million cards, an increase of 9% year-on-year. Moreover, as Khun Thunsini mentioned, the BTS yellow line launched a new promotion package with the exclusive offer for adult and student Rabbit cardholders and this promotion is expected to increase the numbers of Rabbit card users. Moving to the last one, distribution business, which comprised of Super Turtle and Fanslink. For Super Turtle, it continues to expand its services during October 2023 to February 2024, Turtle launch for new Turtle shops on BTS stations and this expansions brings the total number of Turtle shops to 20 shops located across 19 BTS stations. [ opened-lane ] as its strategy to change product mix, focusing on high-margin products, our own brand product. So Fanslink continue to develop and expand its own brand to be a top-of-mind brand. For example, PANDO has secured a position in the top 5 best-selling brands within the pet care category during the 11/11 and 12/12 big sales campaigns on 1 of the well-known e-commerce platform and this achievement underscores the growing preference of customers for Fanslink owned brand, reflecting its increasing popularity and recognition in the market. And it's all for MIX business update. Next is MATCH business update. Let me hand over to Mr. Kisada.

Thank you, Ms. Nattarat update portion. Moving on to the MATCH portion of the update. First and foremost, please allow me to highlight the performance of Rabbit Holdings life insurance business under Rabbit Life. In the past year, Rabbit Life has set a target for itself for reaching gross premium target of THB 2.5 billion to THB 2.8 billion. By 2023, Rabbit Life reached extended gross premium target goal owe to its strategic marketing campaign aimed at a younger demographic. In addition to that, Rabbit Life also successfully onboarded 1,000 agents as part of its expansion plan. Shifting our focus to the NPL and NPA management business, which was acquired in 2023 under Prime Zone Asset Management, after the acquisition of Prime Zone, it's NPL and NPA portfolio saw a growth of 123%, reaching a valuation of approximately THB 850 million. Lastly, as part of Rabbit Holdings' continuous expansion strategy, the company successfully completed its investment in Metha Asset Management Company on November 2023. Metha is a private fund management with expertise spanning over 20 years in investing both domestic and international markets. This concludes the update for the MATCH portion of the group. I'd like now to pass to Ms. Siriphen to update regarding BTSGIF's Third quarter 2023 performance.

Thank you, Khun [indiscernible]. Good afternoon, everybody. Today, I will discuss the financial footprint of the BTSGIF for the third quarter of fiscal year 2023/'24. In the third quarter, total income of the fund was THB 1.26 billion, up 32% year-on-year and 2.7%, Q-on-Q. The increase came from the income from investment in net Farebox revenue, which increased to THB 1.25 billion, rising by 32% year-on-year and 2.7% Q-on-Q from [indiscernible]. Total expenses of the fund were THB 14 million, increasing 5.4% year-on-year, largely due to asset [indiscernible]. When compared to the previous quarter, total expenses decreased by 20% Q-on-Q, primarily due to a large amount of [indiscernible] spend related to capital reduction and Annual General Meeting in the first quarter. Profit from net investment was THB 1.24 billion, up 33% year-on-year, and 3% Q-on-Q. In this quarter, the fund recorded loss from investment of THB 1.19 billion, these result largely from the decrease in the remaining period of July in net revenue under condition a premium and the adjusted net capital in the fourth quarter fiscal year '23/'24 but partially offset by the decrease in discounting according to the decrease in risk free lane. [ Income ] rates decreased to 6.7% as of December 31, 2023, from 7.1% as of September 30, 2023. Interest in net asset resulting from operation was THB 52 million, decreasing 96% year-on-year but increasing 123% Q-on-Q. Next slide is the income from investment in NRTA. In the third quarter, farebox revenue was THB 1.7 million, up 14.5% year-on-year and 0.2% Q-on-Q. Year-on-year increase came from the ridership growth of 8.7% to 49.9 million trips from the relief of COVID-19 situation and the fare increase of 5.4% from the Effective Fare increase since February 1, 2023. For the O&M cost. O&M cost were THB 451 million, down 16% year-on-year and 6% Q-o-Q. Year-on-year decrease came from the decrease in first selling expense from a large amount of data analytics and marketing service fee last year. Second maintenance expense [ plastic ] from rolling stock refurbishment study expenses last year. And third utility expenses, largely from lower FT cost in electricity expenses. Q-on-Q decrease was mainly due to the decrease in first selling expense from data analytics and marketing service fee and Rabbit Reward point cost. Second, utility expenses largely from lower FT costs in electricity expense, especially offset by higher employee expenses for bonus payment this quarter. Income from investment in NRTA was THB 1.25 billion, increasing 32% year-on-year and 2.7% Q-on-Q. Next slide is the 9 months income from investment in NRTA. I skip this one and go to the financials -- statement of financial position. For the statement of financial position as of December 31, 2023, total assets were THB 37.35 billion, the main component were investment in an NRTA of THB 35.75 billion, decreased by THB 1.19 billion from September 30, 2023. Investments in security and cash of THB 1.3 billion. Other assets of THB 257 million. Total liabilities stood at THB 101 million from a healthy growth of security purchase. Net asset value was THB 37.25 billion, equivalent to THB 6.4355 per unit. This slide is the core network performance. In the third quarter, ridership was 49.9 million trips, increasing 8.7% year-on-year and 0.5% Q-o-Q. As a result of the gradual relief from COVID-19 situation. Average weekday ridership was 608,000 trips, up 9.3% year-on-year and 0.7% Q-on-Q. Average fare in the third quarter was THB 34.1 per trip, up 5.4% year-on-year due to the effective fare increase since 1 January 2023, but slightly down 0.3% Q-on-Q. For 9 months, this year, ridership increased 33.7% year-on-year and average fare increased 5.4% year-on-year. Next slide is the distribution summary. The fund announced a capital reduction for the third quarter of THB 0.2 per unit. Book closure date is on February 27, 2024 and payment date is on March 12, 2024. Total distribution since [ inception ] is THB 6.822 per unit in the form of dividend of THB 4.342 per unit and capital reduction of THB 2.48 per unit. This slide is the business update. For the monthly package, we get [indiscernible] populated with Turtle 8 Company Limited, which is [indiscernible] subsidiary to offer monthly package that was our other Rabbit Reward application. This slide show the previous XTreme saving package for 15, 25 and 35 rides which were sold until October 30, 2023. Next slide is the new monthly package. Since November 1, 2023 BTSC and Turtle 8 company limited has been offering various new monthly package. This package provide additional options for customers to get this package by a special discount coupon. They are XTreme savings, 35 rides, which customers receive [indiscernible] 35 trips as special discounted from -- of THB 600 or THB 1155 for adult. And THB 918 for students. The third one is in Xtreme savings, 25 rides for a price of THB 875 for adults. And THB 700 for student. The third one is XTreme savings, 15 rides for a price of THB 555 for adult and THB 450 for student. And since first on this [indiscernible] there is additional [ 20s ] for a 60-day package. Customer received in just a form attentive and itself will form a [ THB 120 ] for [indiscernible] , THB 390 for adult and THB 310 for student. Next slide is the detail of the discount coupon from [indiscernible] and [indiscernible] Turtle, and other [indiscernible] package, you can see the detail in the film that [indiscernible].