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

Very good morning, analysts and fund managers, and welcome to the fiscal year '23/'24 BTS Group and BTSGIF Analyst Meeting. Thank you all for taking the time to join us today, and we appreciate your continued interest in BTS Group. Before we dive into details, I wanted to take a moment to acknowledge the [indiscernible] landscape that we are navigating is [indiscernible]. Sorry, and the confidence in BTS Group ability to adapt and drive. Therefore, today is a good chance for us to share our latest progress and insights. With that said, let's move on to the agenda. We will be taking around half an hour presenting financial results of fiscal year '23/'24 and business update. We have prepared some time for Q&A at the end. We will encourage your questions and open discussion. Before we begin, allow me introduce our management [indiscernible], Khun Kong Chi Keung, Deputy CEO of BTS Group; Khun Surapong, CEO of MOVE business, he will join us during the Q&A session; Daniel, CIO and Head of IR, BTS Group; Khun Chawadee, CFO of BTS Group; Khun [indiscernible] Treasurer of BTS Group; Khun Siriphen, Fund Manager BTSGIF. Last but not least, a familiar faces of IR team. So without further ado, I'd like to pass it on to Khun Daniel to walk you through the company's performance. Daniel.

Thanks, [indiscernible]. Happy to see so many familiar names joining the call this morning. Last time we met, I think it was 19th of Feb, so 4 months ago, plenty to update about -- we'll run you through the annual results of BTS Group and BTSGIF. Our teams have worked super hard to put all this together. We're itching to start so let's jump right in with the business highlights. So these are business highlights for the full year. Within MOVE, we had a busy year with the Yellow Line, fully commencing its operations in July 2023 and the Pink Line commencing in January 2024. We also received our first government subsidy around about THB 4.8 billion finally, reemphasizing at this point in time and time again, the cash flow impact of this makes a big difference to the investment model of the Pink and Yellow Line versus the previous Green Line. That's a much more favorable arrangement, and that's reflected in our cash flow numbers this year. Pink Line extension, construction progresses 55% and expected commitment in 2025. And on the non-rail side, there's a JV with Winnonie, the e-motor cycle, which is tasked to subset the with [indiscernible]. And also BTSC and BMA signed a 64-month O&M BART contract for new electric buses. Finally, on the MOVE side, this is the subsequent to the fiscal year, but on the 2nd of April, the BMA paid THB 23 billion of principal and interest in full regarding BMA. On the mix side, advertising, the media coverage expanded across the Yellow Line, VGI continues to navigate the challenges with the advertising sector, but did see good momentum on its traditional out-of-home advertising business. MACO [indiscernible] formerly known as like an advertising company rebranded to Roctec. We're just focusing on innovative and communication solutions [Technical Difficulty] and the CEO and the IR team [indiscernible] are readily enabled. Digital services, at cash flow outstanding balance grow to THB 731 million and off-line payment reached 17.8 million Rabbit Cards. Although during the year, we did exercise the disposal of Rabbit-Line Pay. Distribution continues to expand mainly around the Turtle shops, which now number around 22 Turtle shops across 20 BTS stations. In that shop, I think, a sort of significant updates, which you probably have questions or have been asking about throughout the year relate to SINGER. So SINGER, which has held through our Rabbit Holdings, as you well know, there was a sales and purchase agreement already executed to sell most of those shares in SINGER already this year and also divestment in Kerry Express through the tender of where BTS and VGI reduced that statement to 3%, again, primarily to avoid any future risk from losses occurring. Moving on to the -- I think it's the sustainability. I'm looking at this page. I think most of this was already presented last quarter, the only update, one that I can see is the second one, whereby -- yes. BTS Group, basically, you remember that we're a carbon neutral. We have now signed a commitment letter to become net 0 in accordance with science-based targets. And so we'll be preparing our plan to affect that. Moving on to the financial highlights. Operating revenue THB 18 billion, down 0.6% year-on-year. Recurring EBITDA was actually up 6% year-on-year. We'll come into that a little bit later. Net loss, as you'll know, about THB 5.24 billion, although if you adjust it to various nonrecurring items, it does turn out to be a positive number at THB 275 million. On the balance sheet, it remains properly managed cash and liquid investments, $19.4 billion as of the end of March. Adjusted net D/E is 2.5x, however, if we adjust it to -- for the payment of that E&M payment, THB 23 billion, it comes down to 2.15x. On the cash flow side, mainly financing cash flows from financial institutions, THB 7.4 billion and also from the debenture issuance, THB 6.3 billion to finance investments in VGI and TURTLE through out the Pink and the Yellow lines. On the P&L snapshot. As we mentioned earlier, total revenue, THB 24.3 billion; operating revenue, THB 18 billion, basically flat year-on-year. You can see visibly in the graph in the bottom right-hand corner, how little the change was. Recurring EBITDA, however, was up 6% to THB 8.1 billion, but the main contributor there was from our MOVE business, which saw higher interest income. Recurring net profit, THB 275 million, significantly down year-on-year, but net income also significantly down to THB 5.24 billion [indiscernible]. We don't show Q4 figures in this table. But most of that net loss came in the first 9 months actually the Q4 net figure was a profit figure, so it's worth pointing out. In terms of margins, EBITDA margin, 45% and net profit margin negative 21%. Revenue breakdown, 67% MOVE, 28% MIX and 5% MATCH. An insurance slide, which we thought might be helpful to show you guys is reconciling the THB 275 million recurring net profit to THB 5.2 billion net loss according to the financial statements. You can see to reconcile that, we need about 3 key items, which together totaled THB 5.5 billion. The main one being the loss of sale and impairments of investment, which is mainly carry of around THB 3.4 billion. Also the share of loss from Rabbit Holdings of about THB 1.73 billion and other items of THB 350 million. Moving on to the cash flow. Beginning cash, THB 10.2 billion, CFO according to financial statements is a use of cash of THB 6.6 billion -- for interest expense and taxes positive, THB 1.2 billion and indeed, if we adjust CFO to get rid of the investments in the Pink =and Yellow, to allocate the Pink and Yellow Line investments for CFI and also adjust for receivables, the O&M. Adjusted CFO is THB 9.6 billion, which actually represents the strongest cash flow from operation position that we've had in more than 5 years. On the CFI, cash flow from investing, we see a relatively smaller investment footprint this year, THB 3.7 billion investment, key items being Pink and Yellow Line, THB 2.9 billion. Investment properties are mainly from development of head office, THB 2.5 billion, offset from cash received from associates, which is BTSGIF of THB 1.5 billion. On the financing side, use -- sorry, a source of cash of THB 6.3 billion, you see highlighted in green there. The largest items being what I mentioned earlier, THB 7.4 billion net received from loans from financial institutions and also THB 6.3 billion in terms of net debenture receipts. The outgoing being the investments in BTSGIF Turtle as well as others amounted to around THB 4.2 billion. Net cash paid for bills of exchange of about THB 2.3 billion and a dividend payment of THB 2.1 billion, which, of course, is the dividend payment for the previous fiscal year, not for this year, which there will be none, which left us with an ending cash of THB 6.2 billion including liquid investments, THB 19.4 billion. And now moving on to the segmental information, I'll hand over to [indiscernible].

Thank you, Khun Daniel. Let's move on to the segmental performance of MOVE, MIX, and MATCH. Starting with MOVE in FY 2023/'24. Our MOVE operating revenue was THB 12 billion, decreased by 2% year-on-year or THB 219 million, this was mainly due to a lower recognition of Yellow and Pink Line construction revenue falling by 16% year-on-year after the commencement of its commercial operations on 3rd of July 2023 and also 7th of January 2024, respectively. However, the decrease was partially offset by a sale recognition of box revenue from the Yellow line of THB 359 million and the Pink Line of THB 128 million. Also coupled with higher O&M revenue from the contractually agreed increase in operating fee of the Green and also the Gold lines. Turning to the cost side. The cost of MOVE revenue increased by 1% to THB 7.7 billion from losses incurred related to the Yellow and Pink lines commercial operations. As a result, gross profit margin declined to 35.8%. However, gross operating EBITDA MOVE improved 10% year-on-year due to an increase in interest income from mass transit projects. And we also booked a share of profit from investment in BTSGIF of THB 643 million. So this marks a substantial increase of 65% year-on-year, predominantly supported by a steady growth in ridership together with an increase in average pay. Moving on to the MIX business. In FY 2023/'24. MIX operating revenue decreased 1% year-on-year to THB 5.1 billion, resulting from the revenue decline in distribution business, yet advertising and digital services business improved from prior year. Regarding the revenue of each business unit under MIX, let's begin with the advertising revenue. Advertising revenues show an 8% year-on-year improvement to THB 2 billion from a higher utilization rate across all media channels. So in this fiscal year, the utilization reached 47%. Digital services revenue also improved 11% year-on-year to THB 1.9 billion, largely propelled by these factors, including a consistent year around marketing campaign with a significant boost in Rabbit Card subscription utilization notable growth in the loan portfolio and a rise in the issuance of insurance policies. So ultimately resulting in higher revenue. And lastly, for the distribution business, the revenue was THB 1.2 billion, declined by 24% year-on-year from the strategic change in product MIX of Fanslink however, partially offset by an uptrend in revenue from retail business of Turtle. Regarding the cost of sale of MIX business, cost of sales dropped by 5% year-on-year. This led to an improvement in gross profit margin of MIX business up 32.4%. In FY 2023/'24, a share of loss from investment in case of what, THB 905 million was recorded. Moreover, on 22nd of March 2024, BTS Group and VGI subsequently sold kicks share and left with 3% folding kicks to avoid potential further losses. So from this transaction, we recorded a onetime loss from impairment and disposal of investment in kicks totaling THB 4.4 billion in this fiscal year. Separately, we booked a share profit from investment in Roctec of THB 106 million. Lastly, within our MATCH business. Total MATCH operating revenue in this fiscal year was THB 851 million, marking a 33% year-on-year increase, mainly from a higher construction revenue from HHT Construction Company and an increase in rental and services revenue, mainly from [indiscernible] and spot hubs operations. However, during this fiscal year, we recognized a share of loss from investment in Rabbit Holdings of THB 1.9 billion, compared to share profit of THB 515 million in the previous year. So the losses were driven by, first, an impairment loss of THB 1.7 billion, mainly from Rabbit Holding investment in SINGER. Second, our higher share of loss from Rabbit Holdings investment in associates saving. And lastly, no offsetting recognition of gains from disposition of Rabbit Holding Properties as it had in the previous fiscal year. From investment in [indiscernible] of THB 220 million in this period. This was a result of [indiscernible] expansion and also the recognition of gain from the disposition of ordinary shares of Turtle under [indiscernible] estate. Let's move on to the financial position. Total assets as of 31st of March 2024 stood at THB 272 billion, an increase of only 0.4% or THB 1.1 billion from 31st of March last year. The increase was chiefly from an increase in receivables related to the rail business of THB 7.9 billion, and higher project costs related to the Pink and Yellow Line of THB 4.1 billion. This was offset with the reduction in investment in associated companies of THB 9.9 billion, following the divestment in kicks and a decline in cash of THB 4 billion. Total liabilities stood at THB 206 billion, an increase of 9% or THB 16.1 billion from 31st of March 2023. The increase mainly from an increase in long-term debentures of THB 6.3 billion from issuance of BTS Group's debentures of THB 15.7 billion last year, extracting the repayment of the debentures amounting to THB 9.4 billion, together with higher bank loan of THB 6 billion. When looking at the cash position, cash and liquid investment as of 31st of March 2024 remain exhibit strength at THB 19.4 billion. Moving on to the ratio side. Adjusted net debt to equity stood at [ 5x ] that derived from the adjusted EBIT of THB 166 billion. This measure is still properly managed. And as Khun Daniel mentioned earlier, if we excluding government receivables to bring the adjusted net debt to equity down to 1.6x. So this still indicates a healthy range of liquidity and nevertheless, adjusted net D/E after the NM repayment of THB 23 billion, which received on 2nd of April 2024 stood at 2.15x. So this is all about the financial performance. And next, I would like to hand over to Khun [indiscernible] for the MOVE business update.

[indiscernible] it's the business update starting with business for BMA Bangkok Metropolitan Administration, E&M debt repayment. The outstanding E&M debt principal and interest for the grid lines mentioned to with BTSC amounting THB 23 billion on 2nd of April 2024. The [indiscernible] company liquidity as we used the entire amount to repay debt, including refinancing, maturing debentures to exchange and loan for financial institution within the BTS Group. For post E&M government repayment has adjusted net [ GP ] ratio improving to 2.5x. Moving on to Yellow and Pink Line project. These 2 lines commence for commercial operation in FY 2023/'24, ramping BTS the right to collect passenger [indiscernible] for 30 years from the first operational day. Additionally, the [indiscernible], which is the yellow line and Pink line [indiscernible] there has already received the first government subsidies installment of THB 4.8 billion from the board line. Average received a total of THB 57 billion per year for both [indiscernible] in the next 9 years, and this will strengthen our cash flow. For average, retail ridership for both lines in FY 2023/'24 was approximately 44,000 trips for the Yellow Line and 56,000 trips for Pink Line with average varies from 15 to 45 [indiscernible]. For Pink Line expansion, which is submitted to [indiscernible]. Kerry construction progress is at 55% completion and expect to commence the commercial operation in 2025 and exception is posed to significantly enhance daily ridership. Additionally, these 2 line will help generate new revenue seen throughout a long-term occupant over the 30 years concession and secure our advertising revenue. Moving on to the non-rail business. Our interest motorway project is still ongoing. We have began transactions of goods and traffic management system, in which we expect commencement on -- of M6 [indiscernible] in 2025. The second project is to the [indiscernible] project. Since contract signed in June 2023, we are developing the massive plan for the airport and negotiating various privilege with government, such as thank yoax exemption and custom privilege to prepare with the post National Airport at the Thailand First [indiscernible] also expand [ duty free products ] for passenger and insurance and trying to open to 24-hour [indiscernible] up within this area. As we look ahead, we anticipate receiving the notice to foresee or NTP to commence our construction by mid-2025. And apart from these project, and we also signed a 64 month O&M contract with BTSC to offer electric platform for BRT project. This project aims [indiscernible] over 14 station within 15 kilometers running from [indiscernible]. In addition, BTS also joined launch deal service to [indiscernible] to provide electric bike for higher [indiscernible] to modify [indiscernible] driver. This initiative aims to expand BTS Group door-to-door service through first and last mile journey for the BTS passenger [indiscernible]. And that is the conclusion for normal business update. Next Khun Champraphan will update for the further information.

Thank you, [indiscernible]. Now moving on to the next list of update. Starting with advertising business. VGI has been [indiscernible] advertising spend on the Yellow Line and Pink Line. We believe this expansion will enable brands to assess new target consumer groups, but headed VGI's robust media network. VGI collaborate as return to launch a new media package, namely [indiscernible], combining with digital screens at the front of Turtle shop on the BTS stations, this packet will increase VGI's media capacity and also will enable Turtle to promote their products. And draw the attention of the BTS commuters. In addition, VGI traffic plan its media inventory by incorporating, [indiscernible] into new locations, including selected BTS stations and the collection of media includes over 28 touch screens and like [indiscernible], which enhance the reach of an impact of VGI's advertising capabilities. For the [indiscernible] business, [indiscernible] is subsidiary of BTS Holding [indiscernible] Thailand. The revision was [indiscernible] within the VGI mid market and the increase in completion was driven by the extraction of complete and [indiscernible] in the market. [indiscernible], expanded is present in the core insurance sector through the acquisition of [indiscernible] limited broker business. It's to enable [indiscernible] assets over 30,000 FT clients and at least 400,000 [indiscernible] users. [indiscernible] also expanded its footprint into the Vietnam and Singapore market, [indiscernible] incorporating new subsidiaries, which will [indiscernible] business model in Thailand by providing online insurance and financial products compilation service to 2 new customers. Meanwhile, as of March 2024 flow cash has outstanding loan of THB 731 million, it significantly increased by [ 558% ] year-on-year. with a contribution from loan of 74% and loan indd of 76%. Also Rabbit Card also reached 17.8 million costs increasing at 9.6% year-on-year. Moving to the last one, the distribution business, which comprised of sub total advance [indiscernible], VGI [indiscernible] in high stake in Kerry Express, which is 469 million shares or 15.45% [indiscernible] due to intensified petition in the logistics industry. Also [indiscernible] is continuing to expand its service by launch new Turtle shops and [indiscernible] Turtle on the BTS stations. And this expansion brings the total number of Turtle shops, total [indiscernible] shops located across 20 biggest stations and 7 branches of the voyage Turtle at the end of March 2024. For [indiscernible] as it set [indiscernible] change product mix for casting [indiscernible] products or ordinary products. And at the end of March 2024, the proportion of full rent increased from 17% a year earlier to 21%, as a result of [indiscernible] margin improved from 8.5% to 13.6%. [indiscernible] update. Let me turn over to Khun Kisada [indiscernible].

Thank you for the MIX update Khun [indiscernible]. So moving on to the MATCH update, firstly for Rabbit Holdings. For its insurance business in the first quarter, Rabbit Life ranked at #1 in terms of market share, in terms of new business premiums, via digital platforms at [indiscernible] market share in terms of total premiums. For its new goal in FY '24, Rabbit Life has set new targets to reach total gross premiums at THB 2.8 billion and just the loan for the first quarter achieved 20% of its intended targets increasing by 11% year-over-year. An additional goal for '24 is to recruit another additional 1,000 agents by the end of 2024. Moving on to its NPL, [ NPA ] management business under Prime Zone Asset Management. For the first quarter of '24. Prime Zone's total legal debts were THB 1.5 billion with the total acquisition cost at THB 876 million. For Prime Zones performances in the first quarter of '24, the company bought in a total revenue of THB 33 million in total revenue and recorded a total cash collections of THB 18 million. Additionally, it also [indiscernible] for this quarter, our Prime Zone transferred 3 additional NPAs to its existing portfolio, bringing their total NPA account to '22 at a total cost of THB 18 billion. Moving on to Thanulux performances, Thanulux presents the highlights of its new growth engines of 3 new businesses in the first quarter of '24. The secured lending business through oxygen asset currently has a gross loan portfolio of THB 6 billion, increasing from THB 3.9 billion year-over-year. The second one is the management of NPLs and NPAs through oxygen asset management, where the legal balance stood at THB 3.8 billion towards the March ended quarter. Lastly, for real estate for sale business under T&L Alliance has collaborated with Noble in the residential real estate developments across 8 projects under the [indiscernible] REITs. Thirdly, the accumulated sales of property portfolio have reached over THB 10 billion out of a total of over THB 22 billion. That concludes the MATCH portion segment. I'd like to hand over to Khun Siriphen who will take you through the BTSGIF FY '23/'24 performances.

Thank you, Khun Kisada. Good morning, everybody. Today, I will present the financial footprint of BTSGIF for fiscal year 2023/'24. May I skip the financial movement of the fourth quarter, but you can see [indiscernible] on this slide. [indiscernible] of fiscal year 2023/'24 [Technical Difficulty] Okay. Part [indiscernible] our fiscal year 2023/'24 total income of the plan was [ THB 4.72 billion ] up 36% year-on-year from the increase in income from investment in [indiscernible]. Total expenses of the plan was THB 67 million, up 7% year-on-year, mainly from the asset FSOP. Profit from net investment was THB 4.65 billion, up 37% year-on-year. [indiscernible] recorded gross on investment of THB 9.76 billion. The decrease was partially attributed to the reduction in forecast data renewal at a certain [indiscernible] partially offset by the reduction in forecast expense and investment in [indiscernible] in net asset resulting from [indiscernible] was minus 5.1 billion. This slide is the income from investment in a [indiscernible] quarter was modeling for the fourth quarter and go to the fiscal year on the next slide. For the full year of fiscal year '23/'24 [indiscernible] THB 6.6 billion, up 22.8% year-on-year from the increase in ridership by 19% year-on-year to 194.4 million from the relief of COVID-19 [ situation ] and an increase in average fare by 3.2% year-on-year to THB 33.9 meaning from the [indiscernible] increase in first January 2023. From the plus side, earning costs were THB 1.9 billion, down below 0.5% year-on-year mainly from the reduction in first property insurance in [indiscernible] resulting from the [indiscernible] and remaining period from calendar year to fiscal year, the [indiscernible] selling expense related to data analytics and marketing service fee, but partially offset by the utility spend in place largely from the increase in security expense and [indiscernible]. Income from investment in [indiscernible] was THB 4.7 billion, increasing 35.7% year-on-year. Next slide is the statement of financial position. As of 31st March, we deplore total asset was THB 3.4 billion, the main company investment in [indiscernible] of THB 28.87 billion, decreased by THB 6.8 billion. For 31st December '23, investment in security and cash of THB 1.25 billion and other asset of THB 235 million. Total liabilities stood at [ THB 15 million ]. NAV as of 31st March 24 was [ THB 30.38 billion ] equaling to [ THB 5.2494 ] [indiscernible]. Next slide is the [indiscernible]. May I skip the fourth quarter document and go to the fiscal year . For fiscal year 2023/'24, [indiscernible] was [ 194 million ], increasing 19% year-on-year, primarily resulting from the relief of a COVID-19 situation. [indiscernible] was 595,000, up 17.5% year-on-year evidenced by THB 33.9 billion increasing 3.2% year-on-year, mainly from the effective increase in January 2023. Next slide is the distribution. [indiscernible] announced the capital reduction for the fourth quarter of [indiscernible] per unit. [indiscernible] is on 2024 and payment is on [indiscernible] 2024. Total distribution in fiscal year to decrease last [indiscernible]. As total distribution [indiscernible] is THB 7.002. This slide is the business update for the money package. This first November 2023 [indiscernible] at total [indiscernible] has been operating various new money package and on the 1st April 2024 this money package that we extended and can now be partially leading using only 700 Rabbit Cards for THB 100. This packet provides additional options for customers to get discounted by a special discount [indiscernible]. They are [indiscernible]. This slide is the new promotion. Since 1st April 2024, BTS has announced new privilege to [indiscernible] one station, we received 1 point with a maximum of [indiscernible] we will receive double point from this 5 [indiscernible]. [indiscernible] special discount and from a leading brand is given it will be effective for 1 year from [indiscernible] April 2024 to 31st March, 2025. Next slide is the about the valuation report -- this slide summarize the key factor that we're seeing in the valuation report among March '22 versus '23 and March '24 report. The key factor that was seen in March 24 reports were the impact from COVID-19. March '24 report reflect the [indiscernible] transportation situation after COVID-19 pandemic. With schedule recovery and work-from-home situation, while the previous report [indiscernible], lower economic is lower inflation [indiscernible] station, we based the delay of opening of pre-let extension from [indiscernible], which the [indiscernible] passenger will replace. [indiscernible] is decreased from 6.7% to 6.3%. This slide showed its effect between currently or and previously for. In summary, valuation as of 31st of March was THB 28.9 billion decreasing from THB 35.8 billion as of 31st of December [indiscernible] THB 36.9 billion, mainly from a significant increase in revenue of THB 9.2 billion and a decrease in [indiscernible] of expense and investment of THB 2 billion. Moreover there was some small effect from the case in valuation from a certain [indiscernible] of THB 0.1 billion and an increase in valuation from a decrease in the [indiscernible] of 0.4 billion. The following has showed a positive [indiscernible] net capital and costs, you can see the detail in the slide -- that's our [indiscernible]. Thank you.