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

Good afternoon, analysts and fund managers, and welcome to the BTS Group and BTSGIF's Second Quarter '24 and '25 Analyst Meeting. My name is Sasichol, and I will be your moderator during this presentation. [Operator Instructions] We are honored to welcome our management team, starting from Khun Surapong, Manager and CEO of MOVE business; Khun Chawadee, CFO of BTS Group; Khun Daniel, COO of BTS Group; Khun [indiscernible], CEO of MATCH business; Khun Soraya, Acting CEO and CFO of Rabbit Holdings; Khun Siriphen, Fund Manager of BTSGIF; and other management and IR team. In this quarter, we would also like to hear your feedback about today's presentation. So please scan the QR code, which will be shown at the end of the meeting. For now, I would like to hand over to Khun Daniel to recap on this quarter financial performance.

Thank you very much. Welcome again to the quarterly analyst conference, kicking off with the second quarter business highlights. Going through our MOVE business, not so much a highlight. But as you know, we received the second subsidy installment for the airline of about THB 2.5 billion. As you know, the subsidy is down THB 4.8 billion for the year for both lines. The losses for the Pink and the Yellow lines continue, but reduced somewhat this year with a 17% improvement Q-on-Q. They're looking at about THB 390 million per quarter for those 2 lines. The court dispute is actually an old update, the same as the previous quarter, but drawing attention to the fact that the payment date of the 22nd of January is becoming closer. I'm sure Siriphen will give some updates on that later on today. In non-rail, BRT, commercial and electric commercial operation of the electric bus began on September 1, 2024. Within our MIX business, our operational revenue improved both year-on-year and quarter-on-quarter, driven by recovery in the advertising and distribution businesses. Encouragingly, you'll see some strong improvements in our advertising business. For example, we've seen 20% increase in VGI media, as well as 30% increase in some of the year-on-year outdoor figures. Also no continued operational loss from the carry investments. And those of you who joined VGI's quarterly call earlier on this week will know about the THB 78 million net profit was recorded for the quarter. As previously mentioned also, there's been a virtual bank submission, a virtual bank application submission, where VGI, together with its partners, have already applied for the virtual bank license for the VGI team. The PP process VGI has largely been completed. THB 13.2 billion has been raised. VGI also completed the state sale in ROCTEC, the BTS Group, and received cash proceeds of around THB 2.2 billion. After the completion of both transactions, VGI will receive cash of around about THB 15 billion, but these capital flows won't be visible in this quarterly result. That'll be visible in the next set of quarterly results. That's part of the restructuring. The rest of the group restructuring was at the BTS Group level, where, as you know, there is 1 new share for every existing 4.5 shares, so about a 20% increase to the capital base. So we successfully raised around THB 13.2 billion of our rights offering, which was heavily oversubscribed. Of those proceeds, THB 7.1 billion was used to acquire RABBIT and ROCTEC shares already by the Voluntary Tender Offer process, and the remaining THB 6.1 billion allocated to repay debt for working capital. Those shareholding change just summarized there in the bottom right-hand corner. RABBIT is now held about 65.4% by BTS Group and ROCTEC, 63.2%. So as a result, ROCTEC and RABBIT will be consolidated. The financial statements will be consolidated within BTS Group starting November 2024, I think it's November 4, '24. So next quarter, you should see a 2-month consolidation effect of those 2 companies. Moving on to the financial highlights. Profit and loss of Q-on-Q revenue improvement, but profit still remains subdued. Operating revenue of THB 3.9 billion, up 6.5% Q-on-Q, but flat -- slightly flat year-on-year. Recurring EBITDA, THB 1.86 billion, down 10.5% year-on-year, the reduction largely driven by the MOVE and the MATCH businesses, but offset by an improved performance in EBITDA of the MIX business. Net loss was recorded around about THB 450 million, but that includes around about THB 200 million related to FX losses. So if we adjust for those, it would be around about THB 260 million. On to the balance sheet. Again, it's not yet factoring in the capital increase, but cash and liquid investments decreased to THB 15 billion. Adjusted net debt to equity improved to 2.36x. If we then factor in the RO proceeds, which will now be received, it's 1.83x. And then if we then adjust for the repayment of the government receivables related to the O&M, it will be around about 1.3x. Cash flow. Against 6 months cash flow, net cash flow from operating activities about THB 22.8 billion, used to repay debt, THB 13.3 billion loans from financial institutions and B/E payables as well as debentures, THB 5.7 billion. A quick look at the overview of second quarter financial statements. You see total revenue, THB 5.445 billion, around 10% year-on-year. And in the bottom right-hand corner, you see that is largely from the MOVE business. We'll come to the segmental analysis. Recurring EBITDA, as I said earlier, down 10%, primarily with the MOVE and MATCH business. It's worth noting that on a Q-on-Q basis, revenue was up 11% Q-on-Q, operating revenue was up 6.5%, and GOP was up 15.4%. So some uptick in the performance on a Q-on-Q basis. But as I said earlier, net loss, THB 456 million, a turnaround from THB 257 million profit the previous quarter. Recurring EBITDA margin of 47.6%, and a net loss margin of 16.8%. Revenue breakdown: 63%, MOVE; 33%, MIX; and 4%, MATCH. On to the 6-month cash flow snapshot, as you can see on the slide. It's very straightforward cash flow. We got starting cash around THB 6 billion, quite similar to ending cash, THB 5.9 billion. Very large chunk in blue, source of cash around about THB 23 billion, largely from the E&M repayment. And of that, THB 21.5 billion was used to repay debt and debentures of various sources, and a little bit of investing cash flows related to investment properties is THB 1.5 billion and investments in associates of THB 1 billion, leaving us with a THB 15 billion balance of cash and liquid investments at the end of the quarter. Now handing back to Khun [indiscernible] for the MOVE business update.

Thank you, Khun Daniel. Let's move on to the segmental performance of MOVE, MIX and MATCH. Starting with MOVE business. In the second quarter of 2024, '25, operating revenue was THB 2.5 billion, a 6% decrease year-on-year. It's because really to lower construction revenue from the Pink main line, following the construction completion. However, this was partially offset by an increase in farebox revenue from the Pink main line and an increase in O&M revenue. Separately, we incurred a share of profit from our investment in BTSGIF of THB 110 million, supported by a growth impact of revenue for the Core Line Network, driven by a 3% growth in ridership, facing 52.5 million trips. Next, moving on to the MIX business. Operating revenue was THB 113 million, reflecting a 10% year-on-year increase, driven by the recovery in the Advertising and Distribution businesses. This improvement was attributable to the following. Advertising revenue increased by 21% year-on-year, mainly from a higher utilization rate of all media channels to 52% from 44%. And distribution revenue grew by 23% year-on-year, driven by higher revenue from TURTLE. However, also we said revenue declined by 8% year-on-year, due to lower project revenue under Bangkok Payment Solutions and change in revenue recognition of Rabbit Reward. For this period, MIX's share of profit was THB 83 million compared to a loss of THB 137 million in the same period last year. This turnaround was mainly due to the absence of a share of loss from investment in KEX and the positive contribution from ROCTEC and JMART. Next, within our MATCH business. Total MATCH revenue in this quarter was THB 179 million, reflecting a 28% year-on-year increase, driven by higher rental and service revenues. In this quarter, we got a share of loss from investment in RABBIT of THB 293 million. The increase in loss was mainly due to lower profit from the insurance business and higher loss of exchange rates. On a positive note, we record a share of profit from our investment in Thanulux amounting to THB 33 million for this quarter. Let's move on to the financial position. Total asset as of September 30 [indiscernible] compared to 31st March. This decline was mainly from the following factors: a reduction in receivable and net per share and installation and premium for operating system following the retainment of [indiscernible]. However, we think this was partially offset by an increase in receivable under agreement with government authorities and a rise in investment properties. Total liabilities decreased by 9% from the end of March, mainly from a reduction in B/E and loan for financial institutions as we paid debt for [indiscernible] and repayment. Total equity down by 3%, mainly from a net reduction in recent earnings. And moving on to the financial ratio. As of date, net debt to EBITDA stood at 2.36x [indiscernible] net debt of THB 152 billion. And this is all about the financial performance. Next, I would like to hand over to Khun Sinatta for the restructuring part.

Thank you, Khun [indiscernible]. Allow me to show a summary. First BTS Groups' success [indiscernible] THB 13.2 billion via rights offerings, which was oversubscribed for investor. The THB 507.1 billion has been used to carry out for the warrant tender offer for RABBIT and ROCTEC, which the slide now show on the left-hand side. At the same time, VGI had a capital increase via private investment of THB 13.2 billion, and this transaction is expected to be completed with funds received with the end of the year. Even if BTS scope in VGI is diluted, which will remain a subsidiary of BTS Group. And lastly, VGI's sole uptake to BTS Group and has already received THB 2.2 billion in cash. For transaction bring VGI a cash in for THB 15.4 billion. And the next slide shows the detail of the pre and post transaction, allowing how to fund our source and use. Just to recap. On the left-hand side, you can see how the THB 13.2 billion from our group used in, as I mentioned earlier. First, about THB 7.1 billion was due for RABBIT and ROCTEC, and the remaining THB 6.1 billion will be used through debt repayment and working capital. On the right side, you can see the detail of pre and post transactions. And after the VTO, BTS Group expects in RABBIT increase from 47.7% to 65.4%, and expect in ROCTEC increase from 17.3% to 63.2%. This is part of connected transaction where VGI also diverted ROCTEC 27.1% to BTS Group via VTO. And as a reminder, RABBIT and ROCTEC have been consolidated with BTS Group starting in November onwards. Also, after VGI [indiscernible] BTS Group expects in VGI from 61.1% to 34.2%. And let's move to our business, starting from MOVE business. Some updates on the Rail business, starting with the Pink Line Extension from Si Rat to IMPACT Muang Thong Thani Challenger 1. We're expecting to start operation within the next year. And as of October this year, construction is about 75% complete. After the start operation, we expect ridership to exceed 10,000 trips per day. Next, let's move on to Intercity Motorway projects, which are part of our non-Rail business. Currently, as to in the gray table, there are 2 projects under construction. First, M81 (Bang Yai - Kanchanaburi) and M6 (Bang Pa In - Nakhon Ratchasima). Post project has the same PPP Gross Cost and are expected to start operation 2025 for M81 and 2026 for M6. Also, the upcoming projects playing for the impact we have in our later. First, M5 Extensions (Rangsit - Bang Pa In). Next, M82 (Bang Khun Thian - Ban Phaeo) and the last, M9 (Bang Khun Thian - Bang Bua Thong). And now let's move on to [indiscernible] with our MIX business.

Thank you very much, Khun [indiscernible] for the introduction. Moving to MIX business update. For advertising business, VGI had launched to create new advertising products. First, we call it SuperBKK, which is the ads package that focuses on extensive coverage in Bangkok area. This reach more than 80% of Bangkok population. The second product, we call it SuperBTS, which is an ad package that focuses on high frequency on BTS to ensure maximum brand recall of 5 million BTS passengers. And third is the Grand Static, which is the combined wall and platform ceiling on substation that has high impact and allows brands to use innovative ideas to grab passenger's attention. As a result, advertising revenue was THB 605 million, increasing by 28% year-on-year with utilization rate of 52%, increasing from 44% in the same period last year. Moving to Digital Service business. Rabbit Care has sold 54,000 insurance policies within the second quarter, decreasing by 9.5% year-on-year, consisting of 75% motor insurance and 25% of other types of insurance. For Rabbit cash, total outstanding loan was THB 926 million, increasing by 92% year-over-year, consisting of 70% Nano loan and 25% Welfare loan. For Rabbit Card, it has continued to launch bundled travel packages and issue special and collectible cards, resulting in 18.6 million cards in circulation, increasing by 10% year-over-year. For Distribution business, SuperTurtle has opened 3 Turtle e shops, which is a smaller format compared to the Turtle shop on the Green Line, reaching total shops to 26 shops compared to 11 shops for the same period last year. Fanslink [indiscernible] changes for the mix to focus on old-brand products to enhance profit margin. At the same time, it diversify its product portfolio to cover beauty products from Korea and food supplement from Australia. I would like to hand over to Khun [indiscernible] for RABBIT Holdings business update.

Thank you, Khun [indiscernible]. Moving to MATCH update under Rabbit Holdings. First up is the real estate business for the Hotel segment. Third quarter 2024, RABBIT's hotel portfolio equals 7 owned hotels and 2 leased properties such as Eastin Grand Phayathai under the [indiscernible] project in Thailand, and Vienna House by Wyndham [indiscernible]. Together, these properties represent 1,890 operational keys. The Hotel segment record THB 732 billion in revenue, decreasing by 23% year-on-year, [indiscernible] by the recovery of [indiscernible]. This boost the hotel's overall occupancy rate to 76%, up from 57% in the same period last year. Next up, moving to the insurance business, Rabbit Life. Our insurance business has set an initial growth of total gross premium target of THB 2.8 billion for 2024. As of the first 9 months, it has achieved THB 1.7 billion, achieving 62% of its annual goal. To increase its growth, Rabbit Life is expanding its distribution network with [indiscernible] to recruit an additional 1,000 agents by the end of 2024. Beyond agent expansion, Rabbit Life is also focusing on product innovation to cater to customer needs and building ownership toward its bridge. Now I would like to pass to Khun [indiscernible] for next update on MATCH. Thank you.

Thank you, [indiscernible]. I would like to introduce ROCTEC, which ICT Solutions company with nearly 40 years experience, founded in Hong Kong, specializing in communication system, especially transportation industry. We focus on replicating success in Hong Kong and expand into Southeast Asia, beginning with Thailand, which BTS Group and [indiscernible] Air are the key client for this region. Currently, ROCTEC operate 2 core businesses. Firstly, ICT Solutions, which account for 85% of total revenue. Next, advertising business, contributing 15% of revenue. Digitalization present our working [indiscernible]. ROCTEC offer into end services starting from consultation, system development, implementation and maintenance. Our 3-year performance are shown on the right-hand side of the slide. The company has shown stock driven by ICT Solutions business, achieving 11% CAGR in total revenue for all past 3 years. On bottom line, NPAT of around in 2021/'22 and remain growth trajectory, which also reflects on NPAT margin. We continue to see growth momentum in second quarter 2024, '25, which apply of THB 870 million, representing 20% year-on-year increase, and the bottom line of THB 80 billion, reflecting 42% year-on-year growth. Next, I will hand over to Khun [indiscernible] to update on the performance of BTSGIF.

Thank you, [indiscernible]. Good afternoon, everybody. Today, I will present the financial performance of BTSGIF further. First, for the second quarter of fiscal year '24/'25. In the second quarter, total income of the fund was THB 1.08 billion, declining 12% year-on-year, but rising 10.4% Q-on-Q. Income from investment in net farebox revenue was THB 1.07 billion, dropping 12.2% year-on-year, mainly from higher maintenance costs this year, but lost 10.5% Q-on-Q due to higher ridership. Total expenses of the fund were THB 14.8 million, decreasing 16.2% year-on-year, largely due to a reduction in fund management fee. When compared to the previous quarter, total [indiscernible] increased by 6.3% Q-on-Q, mainly due to [indiscernible] expense related to capital reduction and to communication with the unitholder. Profit from net investment was THB 1.06 billion, decreasing 11.9% year-on-year, but increasing 10.5% Q-on-Q. In this quarter, the firm recorded loss from investment of THB 790 million. This resulted largely from the decrease in the remaining period of the line revenue under concession agreement and the decrease in the forecast farebox revenue in the second half of this year, but was partially offset by the decrease in lease [indiscernible] according to the decrease in lease prelet. [indiscernible] increased to 6% in this performance from 6.3% in the previous quarter. Changes in net asset resulting from operation was THB 271 million. This slide is the income from investment in [ RTA ]. In the second quarter, farebox revenue was THB 1.74 billion, up 2.9% year-on-year and 8.9% Q-on-Q. Year-on-year and Q-on-Q increase came from the ridership of 5.7% year-on-year and 9.8% Q-on-Q to 52.5 million trips from a higher number of weekday and money package portion, but partially offset by fare increase of 2.6% year-on-year, due to money packet promotion and decrease of [indiscernible] Q-on-Q. On the O&M and cost side. O&M and cost was THB 677 million, up 41% year-on-year and 6.3% Q-on-Q. Year-on-year increase came from the increase in maintenance costs from loadings, [indiscernible] provisioning and insurance premium paid this quarter, but partially offset by lower selling expense from a decreased cost due to the restructuring of the new Rabbit Reward loyalty program that reduced the point awarded to passenger. Q-on-Q increase was mainly due to higher maintenance cost from civil work maintenance and insurance premium paid this quarter. Income from investment in NRTA was THB 1.07 billion, decreasing 3% year-on-year and increasing 10.5% Q-on-Q. This slide is our first half performance. May I skip this 1 and go to the financial statement position. For the financial statement position, as of 30 of September 2024, total were THB 29 billion, the main component were investment in NRTA of THB 27.5 billion, decreased by THB 790 million from June 30, 2024; investment in security and cash of THB 1.5 billion; and other asset of THB 2 million. Total liabilities stood at THB 41 million, and net asset value was THB 29 million, equivalent to THB 5.0091 per unit. Next slide is the card network performance. In the second quarter, ridership was 52.5 million trips, increasing 5.7% year-on-year and 9.8% Q-on-Q, mainly resulting from more weekday in this quarter and further supported by money package promotion. [indiscernible] weekday was 633,000 trips, up 4.9% year-on-year and 5.6% Q-on-Q. EBITDA in the second quarter was THB 33.2, decreasing 2.6% year-on-year due to money packet promotion and slightly down 0.9% Q-on-Q. Next slide is the distribution summary. The fund announced the capital reduction for the second quarter of THB 0.195 per unit. Book [indiscernible] debt is on November 27, 2024, and payment debt is on December 12, 2024. Total distribution since inception is THB 7.375 per unit. Next is the business update on the money package. Since November 1, 2023, BTS and [ Total 8 ] have been offering new money package. And on April 1, 2024, this money package has been extended and can be partially redeemed using every 700 Rabbit points for THB 100. Since October, the money package can be bought at retail ticket office 60 stations besides our Rabbit Reward application. And on the next slide, in addition from October 1, '24 to March 31, '25, [indiscernible] debit card holder can get the right to purchase the package for 30 days at the price of THB 200. Next is the loyalty program. In addition, loyalty program is still available. Passenger totaling 1 station will receive 1 point and will receive double point when covering at least 40 per week. The point can be redeemed for free trip, discount and new [indiscernible]. This delivery will be effective for 1 year from April 1, 2024 to March 31, 2025. That's all for BTSGIF.

Thank you.