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 Third Quarter 2024/'25 Analyst Meeting. My name is Sasichol and I will be your moderator during this presentation. For the first portion of this meeting, we will be providing you with an overview of our business update and financial performance followed by Q&A session. As usual, we are honored to welcome all the management team, starting from Khun Surapong, CEO of MOVE business; Khun Chawadee, CFO of BTS Group; Khun Daniel, CIO of BTS Group; and Khun [indiscernible] and Khun Soraya ; and Khun Siriphen, Fund Manager of BTSGIF; and along with our management and IR team. As a way, we would 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. To start, we would like to hand over to Khun Daniel to recap on this quarter financial performance.

Thank you. Welcome back, everybody. Nice to see you all. Let's start with a recap of the business highlights starting with our Move business. As now, we received an early new year present or a late Christmas present rather on the 27th of December, when the BMA repaid THB 14.5 billion for the O&M case. They have now paid outstanding debt of around THB 37.5 billion for both the E&M and the O&M to us, and we expect that the outstanding of about THB 29 billion as of 31st of December will be paid in full as well. Within the -- for the Pink Line Extension, there's a small update their construction progress has reached 86% and we're expecting trial operation in May of this year with full commencement in July of this year. On the Mix side, look, the advertising business has seen a very strong business recovery and it continues with profit growing further. Advertising revenue increased by 13% year-on-year and 20% Q-on-Q. Just recovery of the media segment, the utilization right now up to around 61%. VGI reported earlier on in the weak a net profit of THB 308 million for the quarter, up 109% year-on-year and about 300% Q-on-Q. Separately, they've seen announcements of the media business restructuring where VGI is appointing PlanB to manage its advertising inventory. We'll go into more details in that later on. And also that VGI is planning to increase its stake within PlanB. And then finally, as of -- actually, it was just last quarter, but VGI completed the capital increase as well as sale of Roctec, which raised a total of around THB 15.4 billion for them. The group restructuring is also seeing that was completed towards the end of December. So what we saw was obviously a THB 13.2 capital raise or rights offering a BTS Group, of which around THB 7.1 billion was used to acquire shares in Rabbit and Roctec respectively, the shareholding now that BTS holds in those companies are around 65% and 63%, respectively. And the remaining THB 6.1 billion is allocated for debt repayment and for working capital. Moving on to the financial highlights for the quarter. On the profit and loss side, we've seen improved revenue and profit at all levels. Operating revenue of THB 5.5 billion, up 8% year-on-year or 41% Q-on-Q. Recurring EBITDA about THB 2.59 billion. So that's actually coming back to the record levels that were achieved in 2021, up 13% year-on-year and 42% Q-on-Q. Net profit in terms of reported net profit of THB 3 billion, up significantly mainly from one-off gains, which we'll go into later. Look, following the capital raise, balance sheet expansion continues. The total assets of the company now in excess of THB 300 billion. It's a stronger capital structure. Now we have cash and liquid investments of THB 58.5 billion, but up significantly, up from THB 19.4 billion at the beginning of the year. Adjusted net D/E, as you all know, is coming down, down to 1.16x and adjusted net D/E of 0.89x if we exclude those pending government receivables. On the cash flow, no surprises here, we guided at the beginning of the year that we would have record cash flow from operations, which is combining both the Pink and Yellow Line subsidy as well as the repayment of the BMA debt. And that is playing out. As you can see, CFO THB 7.1 billion for the 9 months so far. Cash has strengthened in terms of cash received from the capital increase as well as the VGI PP of around THB 26.7 billion, and we've been utilizing that reduce leverage. We've seen, as you can see here, a reduction in debentures of THB 13.7 billion and also bills of exchange as well. Over to the next slide, which is the P&L snapshot. Total revenue for the quarter, THB 11 billion. So that's up 60% in terms of year-on-year and 100% Q-on-Q. That's mainly driven by the one-off gain from the change of status of subsidiaries of Roctec and Rabbit Holdings. At the operating revenue level, which doesn't include that, we see an 8% increase to THB 5.5 billion. Again, in the bottom right corner, you see the operating revenue comparison year-on-year, you see where that 8% increase has come from, mainly from Match, the consolidation of Rocted and Rabbit, which is offset with declines from the Move business, and as usual, come to that in each of the segmental analysis. Recurring EBITDA, say, THB 2.6 billion, up 13% percent. However, recurring net profit, once you cut out all the one-offs you could see it still negative THB 200 million. Again, that's negative mainly because of the interest cost and the Pink and Yellow Line that we still carry. Reported net income, THB 3 billion, a significant turnaround. Operating margin -- gross operating margin, 33%, recurring EBITDA margin, 47%, both showing improvements. And in terms of the operating revenue breakdown, I guess the big change this quarter is the increased contribution of the Match business, once again following the consolidation of Rabbit and Roctec. On to the cash flow. This is a 9-month cash flow. You can see the starting cash was THB 6 billion as of 31st of March, ending cash THB 41 billion. The key contributor, you can see the blue column, which is cash flow from operations, again, combining both sort of subsidy payments but mainly driven by the payment of the E&M and the O&M from the BMA. Investing cash flows is a net use of cash of THB 4.8 billion on CapEx of around about THB 3.5 billion as well as some investments in associates of around about THB 1 billion. The green column, which is financing cash flow looks very small, a net source of cash of THB 2.2 billion, but that marks both a significantly positive contribution from the rights offering and the PP proceeds around about THB 26 billion raised and then sort of offset with mainly for repayment of bills of exchange and repayment of long-term debentures and interest payments. leaving us with net cash of -- ending cash rather of THB 41 billion. And if you include the liquid investments, that would be around about THB 58 billion. And now moving on to the business units, Khun Sasichol.

Thank you, Khun Daniel. Let's move on to the segmental performance of Move, Mix and Match. Starting with the Move. In the third quarter, operating revenue was THB 2.4 billion, a decrease of 28% year-on-year. This decline was mainly due to lower construction revenue following the completion of the Pink Main Line. However, this was partially offset by the Farebox revenue from the Pink Main Line and an increase in O&M revenue. Separately, we recognized a share of profit from our investment in BTSGIF of THB 122 million, supported by a growth in Farebox revenue on the Core Line Network, driven by a 6% growth in ridership reaching 53 million trips. Moving on to Mix business. This quarter marked another period of a recovery in advertising revenue and VGI net profit growing further to reach THB 308 billion, up 109% year-over-year. Total operating revenue was THB 1.4 billion, a decrease of 4% year-on-year, mainly due to a decline in revenue from the digital service business. Allow me to start with advertising revenue. Advertising revenue increased to THB 665 million, represents an increase of 13% year-on-year and 20% Q-on-Q due to the continued recovery of all media segments, with utilization improved to 61%. Digital services revenue declined by 20% year-on-year, largely due to lower project revenue under Bangkok Payment Solutions and change in revenue recognition of Rabbit Rewards. However, Rabbit Cash performed well this quarter, interest income rose alongside an increase in its outstanding loan. Distribution revenue fell by 9% year-on-year, mainly due to lower revenue from fundings, driven by a decrease in sale of other brands products. However, the decline was partially offset by higher revenue from super total retail business. And during this period, Mix recorded a share of profit of THB 112 million, marking a significant turnaround from the THB 230 million loss reported in the same quarter last year. This turnaround was mainly attributable to the absence of a share of loss from investment in Kerry as well as a gradual recovery in JMART's operational performance. Lastly, within our Match business, total Match revenue for this quarter was THB 1.7 billion, a significant increase of 525% year-on-year. This growth was primarily due to consolidation of Rabbit and Roctec into BTS Group's financial statement starting in early November 2024. Rabbit contributed THB 1,017 million with Financial Services revenue of THB 324 million, mainly from insurance revenue under Rabbit Life and within real estate business revenue of THB 693 million, driven by domestic hotel operation in Thailand. Roctec contributed THB 464 million, primarily supported by Integrated Technology Solutions on the back of high demand from both private and public sector projects in Hong Kong. In this quarter, we recognized a lower share of loss from investment in Rabbit of THB 113 million, compared to a loss of THB 834 million in the same period last year. This improvement was mainly due to the recognition of only 1 month under equity method and the absence of an impairment loss on investment in Singer. Let's move on to the financial position. As of 31st December, total asset increased by 20% compared to 31st March. This growth was driven by the following factors, an increase in cash and cash equivalents as well as a rise in investment property and PPE, mainly due to the consolidation from Rabbit. This increase was partially offset by a reduction in receivable under purchase and installation agreements for operating system following the repayment of Green Line . However, this decrease was partially offset by an increase in receivable under agreement with government authority and a rise in investment property. A net reduction in receivable under agreement with government authority, mainly due to the repayment of the first O&M debt from BMA on 27th December last year. Total liability increased by 6% from the end of March, mainly from higher loan from financial institutions, largely driven by the consolidation of Rabbit Loans. Total equity significant loss by 63%, mainly from an increase in issued and fully paid share capital following the RO transaction as well as an increase in noncontrolling interest in subsidiary due to the change in status of Rabbit and Roctec through subsidiary. Moving on to the financial ratio. The adjusted net debt to equity stood at 1.16x derived from the adjusted net debt of THB 125 billion. And this is all about the financial performance. Next, I would like to hand over to Khun [indiscernible] for restructuring part.

Thank you, Khun Sasi. First, good afternoon, everyone. Allow me to show the group restructuring summary. First, BTS Group successfully raised THB 13.2 billion through a right offering on 28th October last year. Of these funds, THB 7.1 billion has been used to carry out foreign trade and offer of VTO for Rabbit and Roctec, with the rationale shown on the right-hand side. The remaining THB 6.1 billion will be used for debt repayment and to working capital. After the VTO, BTS Group's stake in Rabbit increased from 47.7% to 65.4% and its stake in Roctec increased from 17.3% to 63.2%. Just a reminder, Rabbit and Roctec have been consolidated with BTS Group starting since November last year. At the same time, VGI completed a capital increase via private placements from 4 investors raising THB 13.2 billion, which was finalized on 20 December 2024. Also BTS stake in VGI has been diluted. VGI remains a subsidiary of BTS Group. Lastly, VGI sold Roctec to BTS Group and has already received THB 2.2 billion in cash. Both transactions have provided VGI with a total cash inflow of THB 15.4 billion. Moving to the update on our debt situation with BMA. We have 2 main parts of the BMA debt -- with the BMA. The debt for the E&M system work on the Green Line extension 2, this debt was paid off on 2 April 2024 for THB 23 billion. Most of this payment has already been used for debt repayment. Next, the O&M of Green Line extension 1 and 2, the debt is divided into 3 pillars. First lawsuit, May 2019 till May 2021, second lawsuit June 2021 till October 2022, and the third non-litigation debt November 2022 to present. For the first lawsuit, we already received THB 14.5 billion on 27 December 2024 and most of this has been used to pay debt. Further down the bar charts below, you can see the financial impact of these repayments after this full settlement or as just that debt will decrease from THB 125 billion in third Q 2024/'25 to THB 96 billion by the end of fiscal year '24/'25. This will also improve our leverage ratios, reducing them from 1.2x to 1x by the end of the fiscal year. Let's move to 3M business overview starting for Move business. The Pink Line Extension from Si Rat to IMPACT Muang Thong Thani Challenger 1. We're expecting trial operations to begin in May with full commercial commencement in July this year. As of January, construction is about 86% complete. Once operations begin, we expect ridership to exceed 10,000 trips per day. Next, we're going to move to Mix update with Khun [indiscernible].

Hi, everyone, for updates for the Mix business. In the past quarter, VGI has successfully increased the capital for investors and already registered the capital increase with the Department of Business Development, resulting in VGI having registered capital of THB 2 billion, divided into 20 billion shares with the par value of THB 0.1 per share. In addition, VGI has successfully issued warrant W4 to existing shareholders, which the warrant holders can exercise their right to purchase the newly-issued shares of VGI at the ratio of 1 unit of warrant to approximately 1 unit of new shares at the average price of THB 1.5. The SET will suspend the trading of warrants during the middle of August and the warrant holders who wish to exercise their right can submit the notification in the last 2 weeks of August, so that they can exercise their right to purchase the new shares on the 3rd of September this year. Apart from that, VGI has restructured their advertising business by engaging into an advertising media management contract with Plan B Media Public Company Limited in which VGI hired PlanB as a media manager to manage the sales of all media inventory of VGI for approximately 5 years. The benefit that we are expecting is that the synergy in terms of revenue because the advertising media of VGI has covered all strategic locations in Bangkok such as BTS Sky Train, Yellow Line, Green Line, Pink Line and office building around 200 buildings around Bangkok. When VGI media combined with Out of Home media PlanB, we will enable the combined advertising business to create media marketing solutions that answer the brand more effectively. In addition, if we bring the synergies in terms of operational and cost management because the sale team of VFI and PlanB we will be under the same management team. Apart from that, the collaboration of PlanB at this time will benefit VGI in terms of expertise and network of PlanB and will result in operational efficiencies in terms of management and broader market reach. However, if the operating result does not meet the expectation, VGI reserves the right to terminate the contract. Apart from that, VGI is still confident in the potential of our core media business, and VGI will increase the shares we apply by placement in PlanB with total value of around THB 1 billion resulting in PlanB increase its holding -- I'm sorry, resulting in VGI increase its holding in PlanB from 17.6% to 19.5%. The entry into the media management agreement contract and the PP require an approval in PlanB AGM in April and is expected to be complete during the middle of this year. Moving to the Rabbit Holdings update.

Before we dive into the details, I'd like to highlight once again, with the completion of the group's restructuring, Rabbit Holdings and Roctec have officially become subsidiaries of BTS Group effectively from November 2024. BTS Group now has a shareholding in Rabbit at 65% and Roctec at 63%. Firstly, I'd like to take this chance to say this is Rabbit Holdings' fiscal year closing and take this opportunity to provide you with Rabbit Holdings' financial performance in case you may have missed the analyst meeting. We reported total revenues of THB 5.9 billion, reflecting an 11% year-over-year growth, primarily driven by the strong performances of Rabbit Holdings' Real Estate property business as shown in the upper half of the presentation slide. As presented, our Real Estate segment contributed THB 4.2 billion, marking a 29% year-over-year increase. The growth was led by 2 key areas. The first one is the hotel business revenue totaled at THB 2.8 billion, up by 43% year-over-year, fueled by the continued recovery in Thailand tourism sector and overall occupancy rates of 72% across the domestic and international hotels. The second one is the rental properties bringing in total revenues of THB 1.3 billion, growing 17% year-over-year, supported by the unicorns office spaces and leasing of overseas hotel properties. Moving below as for the Financial Services segment, looking for -- looking at Rabbit Holdings' financial services business, revenues increased 13% year-over-year to THB 1.2 billion, as shown in the lower half of the slide. The life insurance business under Rabbit Life remained the key contributor, bringing in THB 1 billion, up by 5% year-over-year, driven by higher singles -- higher single and renewal premiums. Lastly, as part of Rabbit Life's goal, it achieved 92% of its year -- full year target with total gross premiums reaching THB 2.6 billion. Overall Rabbit Holdings' financial performance reflects its ability to navigate industry challenges with total revenue increasing by 11% year-over-year to THB 5.9 billion. With that, I'll hand it over to Roctec's IR to discuss their business updates. Thank you.

Thank you. So for the last update at Match business, we circle back to a matter relating to PlanB. So Roctec is expected to divest 50% of its stake in Hello Bangkok to PlanB for THB 2 billion. For the approval process, already passed board earlier this month and is subject to AGM approval later in April. For the investment rationale, as you can see on the bottom right-hand side, I think mainly 2 reasons for 1 strategic alignment. So Roctec will move towards the ICT solutions. Number 2 is enhanced complete liquidity with the THB 2 billion cash. So the question arise, what will we do with the excess cash. So all in all, after this transaction, we should have around THB 4 billion in cash. And of course, we aim to further strengthen our ICT Solutions business. And now we're starting opportunities. And if there are charities, we'll surely keep you posted. So for impact to financial statements, we expect about THB 90 million gained in P&L. And for the balance sheet, offsetting cash with the investment in associates. And now I'd like to pass it on to Siriphen for the BTSGIF earning updates.

Thank you. Good afternoon, everybody. Today, I represent the financial performance of BTSGIF for the third quarter of fiscal year 2024/'25. In the third quarter, total income of income of the fund was THB 1.24 billion, declining 1.1% year-on-year but rising 15.5% Q-on-Q. Income from investment in this. Farebox revenue was THB 1.23 billion, dropping 1.1% year-on-year, mainly from higher maintenance cost this year but rose 15.6% Q-on-Q due to a significant decrease in operating and maintenance costs. Total expenses of the fund were THB 10.7 million, decreasing 23.6% year-on-year, largely due to a reduction in fund management fee. When compared to the previous quarter, total expenses decreased by 27.4% Q-on-Q, primarily due to the absence of closure expense related to capital reduction and [indiscernible]. Profit from net investment was THB 1.23 billion, decreasing 0.8% year-on-year, but increasing 16.1% Q-on-Q. In this quarter, the fund recorded loss from investment of THB 714 million. This result largely from the decrease in the remaining period of the revenue under concession agreement but was partially offset by the decrease in the discount rate. in net asset resulting from operation was THB 492 million. This slide is the income from investment in RGA. In the third quarter, Farebox revenue was THB 1.77 million, up 4.2% year-on-year and 1.5% Q-on-Q. Year-on-year and Q-on-Q increase came from the ridership growth of 6.2% year-on-year and 1% Q-on-Q to 53 million trips, from mainly package promotion, but partially offset by the [indiscernible] decrease of 1.9% year-on-year due to monthly package promotion. For the O&M costs, O&M costs were THB 537 million, up 18.9% year-on-year, but down 20.8% Q-on-Q. Year-on-year increase here from the increase in maintenance cost from rolling stock refurbishment, maintenance and employee explain from related employee and increased [indiscernible] but actually offset by the lower selling expense from a decrease in point cost due to the restarting of the new Rabbit Rewards loyalty program that reduced the points awarded to passenger. Q-on-Q decrease was mainly due to lower maintenance cost from rolling stock refurbishment at insurance premium. Income from investment in NRTA was THB 1.23 billion, decreasing 1% year-on-year, but increasing 15.6% Q-on-Q. This is the 9-month performance. May I skip this one and go to the statement of financial position. As of 31st December 2024, total assets were THB 28.4 billion. The main component will investment in NRTA of THB 26.8 billion, decreased by THB 740 million from [indiscernible]. Investment executed a cash of THB 1.4 billion. Total revenue stood at THB 9 million and net asset revenue was THB 28.4 billion, equivalent to THB 4.8991 per unit. Next slide is the core network performance. In the third quarter, ridership 53 million trips, increasing 6.2% year-on-year and 1% Q-on-Q mainly from monthly package promotion. [indiscernible] ridership was 641,000 trips, up 5.4% year-on-year and 1.2% Q-on-Q. in the third quarter was THB 33.4 due to -- decreasing 1.9% year-on-year due to monthly package promotion, but slightly up 0.5% Q-on-Q. Next is the distribution. The fund announced the capital reduction for the third quarter of THB 0.2 per unit, [indiscernible] 27 Feb 2025 and is on 13 March 2025. Total since inception is THB 7.575 per unit in the form of dividend of THB 4.342 per unit and capital reduction of THB 3.223 per unit. Next is the business update. This is the same as the previous quarter for the packet from -- it's been selling package, there are 10 to 35 package with [indiscernible]. Since October, the monthly package can be bought at BTS office [indiscernible] Rabbit Rewards application. In addition, for -- in addition from 1st October '24 to 31st March '25, Bangkok [indiscernible] gave the right to pursue the package [indiscernible] at a price of THB 200. This slide is the loyalty program. Loyalty program is still available. Passengers [indiscernible] will receive 1 point with a maximum of 8 points per trip and will receive double points when traveling at least 4 trips per week. This will be effective for 1 year from 1st April 2024 to 31st March 2025. That's our [indiscernible].