Rabbit Holdings Public Company Limited (RABBIT) Earnings Call Transcript & Summary

Good afternoon, and welcome to Rabbit Holdings Third Quarter Analyst Meeting of 2023. Today is our very first physical analyst meeting since the pandemic outbreak and we'll have few guests joining us shortly. But however, for those unable to attend the analyst meeting, we are broadcasting this simultaneously right now. And before we commence, please make sure your microphones, cameras are turned off, and please hold all questions to the end of the session. As you now today, we are joined by the CEO and acting CFO, Mr. Soraya Satiangoset and the IR team [Foreign Language]. So let's get started. Moving towards the third quarter of 2023, the financial snapshots are total revenue of THB 1.3 billion, decreasing by 41% year-over-year with the recorded EBITDA of 17%, a reported net loss THB 411 million, decreasing by 55% year-over-year. Once again, I'd like to reiterate Rabbit Holdings transformation from its Real Estate business to the Financial Services business. At present, its Financial Services business include Life Insurance under Rabbit Life, investments in various associates with the latest addition of our financial services with the inclusion of the NPL and NPA business of the Prime Zone Asset Management. More details will be disclosed regarding the last [ segmental ] transaction. In line with the company's business transformation in the last three years, the company successfully divested its real estate assets totaling THB 5 billion, comprising of its European Hotel portfolio and sales of its real estate joint venture projects. For 2023, the company will continue to pursue its divestment plans aiming to dispose both of its remaining real estate projects forecasted at THB 3 billion. The company aims to dispose of its remaining real estate portfolios by 2025 estimated they would bring a net proceeds of THB 34 billion, which will be used to strengthen, expand and sustain the future growth of our financial services business. Next. In this quarter on 15 August, the Board approved of the company's intention to acquire a 50% shareholding of Metha Asset Management through its wholly-owned subsidiary, RBH Ventures. More information about Metha Asset management is that they are a licensed, private fund management company in Thailand founded in 2022. Its strategy is investing for long-term value focused on great long term, sustainable earnings, power and values. The total investment value of this THB 70 million at the target closing date is with in November 2023. The source of funds allocated for the transaction will be from the company's working capital and loans. In this quarter, significant events, the company successfully completed the first investment phase in Prime Zone Asset Management business on the 3rd July 2023. On October 2023, the company entered into a share subscription agreement with Metha Asset Management, as previously mentioned. The last two events are the second and third Rabbit-P Conversion shares, which were completed as of October 2023. Rabbit-P shares accounted for 24.9 billion shares outstanding and Rabbit shares accounted for 6 billion shares outstanding. This quarter, the company recorded total revenues of THB 1.3 billion, a decrease of 41% year-over-year, mainly contributed by lower revenue from its hotel operations from the disposal of its European Hotel portfolio. Conversely, the drop in revenue was offset by higher rental income due to the hotels of the European shifting to a leasing model. The no repeat gain on sales of investments from the disposal of the hotel management platform has lower insurance income due to decrease in premiums starting from single premiums. However if we look at the operating revenue compared on a quarter-to-quarter basis, it grew by 33% year-over-year to THB 1.1 billion. In this quarter, the share of loss was THB 58 million, mainly from share of loss from joint ventures with Sansiri about THB 23 billion, THB 1 million from Singer, THB 34 million share of loss from investments in other associates and JVs. Overall, the company reported a net loss of THB 411 million from the recognition of impairment of assets from our hotels in Europe and unrealized losses from exchange rates. Towards your right-hand side, you can see the total revenue contribution divided by segment. Real estate accounted for 73%, Financial Services business accounted for 22% and others 5%. The revenue growth contribution of Financial Services fell by 36%, followed by real estate falling to 26% and other revenues by 87%. The balance sheet for the third quarter of 2023 showing the total assets of THB 59 billion, decreasing by 7% from December last year. The decrease is from other financial assets largely from fair value measurement, investment in associates mainly from the allowance of impairment loss on investment. Moving to cash flow. As of September 2023, the ending cash was THB 1.4 billion, with net cash from operating activities of THB 959 million, net cash used from investing activities of THB 382 million and net cash used for financing activities of THB 735 million. Moving to CapEx. The company recorded CapEx of THB 4.6 billion in this quarter for purchases in long-term financial assets, other investments and investment properties. Lastly for the debt structure for this quarter, the company has a total assigned debt of THB 18 billion, and on the right-hand side displays the breakdown by currency, which Thai Baht is equivalent to 76%, whereas euro is 24%. For the portion of our breakdown interest, floating rate was 91%, while fixed was at 9%. On the bottom, the company had a total interest-bearing debt of THB 18 billion for this quarter, decreasing by THB 238 million compared to the end of last year. While net interest-bearing debt to equity ratio was 0.45x, an increase from 0.39x at the end of 2022. Moving to operational updates. First, for our financial services. For the insurance business in this quarter, Rabbit Life remains at rank #7 in terms of market share, sales via digital platforms and is also ranked at #16 in market share in terms of gross premiums. This year, Rabbit Life has set new targets to recruit 1,000 agents. And as of this quarter, had recruited 703 agents already. For the progress of its new gross premium targets in the first 9 months of 2023, Rabbit Life has already achieved 67% of its target. Over the revenue breakdown in this quarter. The insurance segment brought THB 257 million, and the breakdown consisted of premiums earned amounting to THB 188 million. Investment income and others registered at THB 69 million. A year-over-year comparison, the lower exhibits the breakdown comparison by premium types. First year premiums increased by 42% to THB 100 billion. Meanwhile renewal premiums grew by 11% to THB 84 million. The breakdown by comparison channel types on the bottom right shows that Rabbit Life's agents increased the number of premiums earned in the amount of THB 1.5 billion. This was owed to a successful agent recruitment goal it achieved last year. Meanwhile, on the upper right-hand side, the breakdown comparison for this quarter grew slightly by 8% in investment income and others. For this quarter, Rabbit Life launched a new health insurance product under Health Smile where the insurer receives a long-term coverage until the age of 99 with a treatment coverage of up to THB 20 million. Additionally, the first 500 policies purchased online will receive a free Box Set from Rabbit Life's collaboration with Thailand's leading street artist Benzilla. Speaking of collaborations, in terms of keeping up with its marketing momentum, Rabbit Life launched a collaborative event under Hop & See to Level Up Life with Benzilla. The event was aimed to inform and guide the new future generation towards financial planning during the upcoming tax season. Moving to Rabbit Life's Fourth Quarter 2023 Future Outlook. There are four phases in mind, which includes enhancement of its sales and products, Rabbit Life will revisit its product mix and continue to launch new midterm products for 2024. For investments, the yield curve remains slightly stable and Rabbit Life has continued to make informed investment decisions through the purchases of debentures. For operations and IT, Rabbit Life aims to implement new digital solutions to ensure efficient case tracking and better team management. For Others, they plan to launch more promotional marketing campaigns in order to capitalize during the tax season. In this quarter, we would like to welcome the new addition of our Financial Services business, Prime Zone Asset Management. Rabbit Holdings through a wholly-owned subsidiary, RBH Ventures announced its intention to invest a 70% shareholding in Prime Zone Asset Management and NPL and NPA management business. Prime Zone Asset Management business consists of a management team with expertise within the AMC business and started securing NPLs specializing personal loan management, debt restructuring and adding value to its acquired or NPAs. On the 3rd July 2023, the first investment phase was completed where the investment was valued at THB 500 billion, bringing the shareholding to 62.5% and by October 2023, the second investment phase is completed with additional THB 200 million, bringing the total shareholding to 70% and total transaction value at THB 700 million. So you maybe wanting about the investment rationale. As part of the company is expansion into financial services business, Rabbit Holdings invested into Prime Zone as it sees ample opportunity within the NPL business since there is great growth potential once the loan support from the Bank of Thailand has ended. If you look towards on your right-hand side, it is estimated in 2022, the NPL in the system was THB 500 billion and the amount of NPL flow release was about THB 70 billion to THB 80 billion. However, in the future, if we assume that the loan support from the Bank of Thailand ends, the NPL in the system decreased by 30% to 60% to THB 800 billion and in turn, releasing more NPL flows of around THB 100 billion to THB 120 billion up for auctions. For this quarter, the NPL and NPL portfolio, the company recognized revenue from Prime Zone of THB 20 million after consolidating since the 3rd of July 2023. This quarter, Prime Zone joined the bidding of certain NPL portfolios and successfully acquired NPLs with the principal balance of THB 192 million. Prime Zone's total loan portfolio is at THB 997 million with total collateral assets of THB 902 million at a total acquisition cost of THB 586 million. Furthermore, Prime Zone recorded a cash collection from its NPL portfolio in the third quarter of 2023 of THB 24 million. On your right-hand side, you can see the nonperforming asset portfolio consisting of 20 assets at a total cost of THB 79 million with each asset averaging at THB 4 million. Moving on to the Hotel segment. This quarter the hotels revenue -- Hotel segment revenue brought a THB 610 million, declining by 37% year-over-year, mainly due to the disposal of our European hotel operations and disposal of 40% investments of our hotel management platform, Absolute Hotel Services. In terms of operational keys the quarter, the total keys was 1835 keys, decreasing mainly from the disposal of our European hotels and the hotel management platform, as previously mentioned. However, this was partly offset by the addition of the new Eastin Grand Phayathai Hotel which opened since the second quarter under the Unicorn project. In terms of -- next -- owned and lease hotels in Thailand, our occupancy rates increased by [ 70% ] in this quarter compared to 55% last quarter, greatly improving year-over-year in line with the overall industry occupancy rates within Thailand at 71%, which improved from 48% year-over-year. So the owned and leased hotels in Europe, the occupancy rate slightly increased to 58% due to seasonality trends in line with the European markets with the ADR reaching THB 4,000, a new record high since the pandemic. Moving on to the Rental segment, this segment consists of office buildings in London, 33 Gracechurch apart from Bangkok office buildings. In the next slide, we have our owned European hotels, which have been changed to operating leases from the partial disposal of our overseas hotels and going forward can expect to receive a rental fee of around THB 666 million per year. The overall breakdown of revenue by office building amounted to THB 75 million in this quarter. Right below, the company has recorded the Unicorn's performances as part of its office rental, bringing the overall net floor to 51,552 square meters with overall occupancy rate at 56% (sic) [ 53% ]. For the Residential segment. This quarter, there are two ready-to-move-in projects under the JV with Sansiri which are in sale which includes KHUN by YOO and The Line Phahonyothin Park whereas two projects are coming in their development phases, which includes The Line Vibe and The Line Sathorn. For the total presales backlog, this amounted to THB 2.2 billion this year -- total presales backlog amounted to THB 2.2 billion, and this year, the presale backlog amounted THB 203 million solely from KHUN by YOO. Once again, before ending [indiscernible], we like to showcase the opening of The Unicorn once again. As you know, the Unicorn is a 51 level mixed-use building comprising of retail, office building and a 5-star hotel under their Eastin Grand Phayathai. The project which was high-end work spaces and top-notch facilities with direct access to the BTS Ploen Chit Station and Airport-Rail link. The 5-star hotel Eastin Grand Phayathai holds 31 floors, featuring 494 floors -- pardon me rooms and suites with high-end facilities that includes all-day dining from The Market @5 and wedding venue from garden deck as well as a rooftop pool. By October 2023, the hotel recorded an impressive 75% occupancy rate, the highest, it's ever been since opening. Moving on to the retail floor, it consists of 6 levels where visitors can discover a range of local and international cuisines to savor quality food and drinks at the retail level. Lastly, the Unicorn offers Grade A office spaces that are customizable and suited for each company's requirements as well as seamlessly integrating the connectivity with direct access to BTS Phayathai and the Airport-Rail Link. For the [ project update ] of The Langham Custom House which is positioned to be a 5-star luxurious hotel continue to progress at 21% completion. This quarter we would like to unveil a new project under The Residences 38, which is an upscale residential project located in Bangkok Thonglor district Sukhumvit 38. The building consists of 37 floors, which is the combination of serviced apartments, a residential condominium and an F&B retail store. The expected completion period for this project will be within 2025. The project highlights are locked on your left hand side, Ananda Development has been appointed as the developers to [indiscernible] see the construction, development and sales planning of the project. This is also blended and consists of 37 floors with the lower floor -- pardon me level 11 are for facilities, amenities which includes the gym and a swimming pool. The 12 Level, which will be operated and managed by Rabbit Holdings with the retail floor. And starting from Level 13 to Level 24 will be the serviced apartments, which will be operated and managed by The Ascott under the brand name, La Clef Bangkok, by The Crest Collection, marking a debut of The Crest Collection in Thailand. Lastly, on the Level 25 to Level 37 onwards will be the residential condominium under the name of the Residences 38. There are a total of 171 units -- 115 units amongst them being serviced apartments and 56 units being condominium. The total project cost is THB 1.9 billion (sic) [ THB 4.9 billion ] with THB 2.5 billion already invested and an additional THB 2.4 billion remaining. The source of funds are a combination of bank loans and shareholder loans. The project time line on your bottom right hand side [ negotiates ] that we have started the redevelopment of the project since the second quarter of 2023. And by the fourth quarter of this year, there will be more sales and marketing announcements of the project. Lastly, the services apartment preopening is expected to be launched by the first quarter of 2025. Here is a review of what the project concept looks like. It will -- it feature a arch feature with colonnade hallways, door with classical ornaments. This is the lobby area perspective boarding between Indo Thainess and with a French twist as well. This is the condominium concept where starting like I said is going to start from Level 25 to Level 37. And this is the serviced apartment concept which should be [indiscernible] by The Ascott under the brand name La Clef Bangkok by The Crest Collection. And this comes to the conclusion of our Analyst meeting -- of our third quarter Analyst Meeting.