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

Good morning, and welcome to Rabbit Holdings Second Quarter of 2024 Analyst Meeting. Before we commence, please make sure your microphones are turned off, and please hold all questions at the end of the session. As usual, today, we are joined by the acting CEO and CFO, Ms. Soraya Satiangoset.

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And the IR team, [Foreign Language].

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So let's get started. Moving towards the second quarter of 2024, the company recorded a total revenue of THB 1.3 billion, down by 16% year-over-year with EBITDA at THB 410 million. All in all, the company recorded a net loss of THB 62 billion, a drastic improvement from the net loss of THB 1.8 billion compared to last year. Once again, just a quick refresher. As part of its transition to the financial services business, the company has successfully divested its real estate assets totaling approximately THB 6 billion, comprising of its European hotel portfolios and sales of its real estate joint venture projects. For this year, the company will continue to pursue its divestment plans aiming to dispose of its remaining real estate projects forecasted at THB 7 billion. Additionally, by 2026, the company aims to dispose almost all of its remaining real estate portfolio, estimated it would bring in total net proceeds of THB 31 billion, which will be used to strengthen and expand the growth of its financial services businesses. For the significant events for this quarter on the left-hand side, you would see the results of the fifth and sixth RABBIT-P conversions were already completed where a total of approximately THB 500 billion -- 500 million RABBIT-P shares were converted to RABBIT shares. As of July 2024, RABBIT-P shares were 24.3 billion outstanding shares and RABBIT shares at 7.4 billion shares outstanding. On the right side, on the second agenda, the AGM was held at the Eastern Grand Phayathai in April, where all proposed agendas were approved by the shareholders in attendance. Lastly, on number 4, it was recently announced that BTS Group will conduct a conditionally voluntary tender offers to procure additional shares of both RABBIT and RABBIT-P shares aiming to increase its shareholders in Rabbit Holdings. The acquisition of shares is part of BTS Group's overall plan to restructure some shareholdings of its subsidiaries and associate companies. Moving on to the financial performance of the second quarter, the company recorded total revenue of THB 1.3 billion owed to its real estate property business, accounting for 74% of total revenue with EBITDA at THB 410 million compared to negative EBITDA of THB 677 million on a year-over-year basis. However, despite the positive improvements, higher finance costs resulting in the company having to book a net loss of THB 62 million, majorly improving compared to the greater net loss of THB 1.8 billion compared to the second quarter of last year in 2030. Towards your right-hand side, you can see the total revenue contribution divided by segment. Real estate accounted for 74% of total revenue. Financial services business accounted for 19%, doubling on a year-over-year basis and others contributed 7%. Moving on to the financial analysis -- financial performance analysis from the waterfall chart on your far left, total operating revenue was THB 1.1 billion, increasing by 36% year-over-year attributed to higher hotel operations owed to the recovery of the tourism sector and insurance business under Rabbit Life. However, this was partially offset by the higher finance costs from domestic operations of THB 230 million and TBH 48 million from overseas operations. Moving down, according to the chart, the company recorded a share of profit for this quarter, which was contributed by THB 108 million from Sansiri joint venture projects, THB 3 million from Metha Asset Management and THB 3 million from investments in SINGER. However, the share of profit was slightly offset by a share of loss from investments in other JVs, bringing the total share of profit amounting to THB 96 million. Lastly, this led to the company reporting a net loss of THB 62 million in the second quarter of 2024. Moving on to the financial position side. The balance sheet for the second quarter displays a 0.2% increase to THB 63 billion from December last year. The increase was mainly from cash and cash equivalents of THB 475 million and investment properties of THB 192 million. Total liabilities slightly increased 3.1% to THB 29 billion, stemming from short-term loans from financial institutions. Moving to the cash flow right below, the ending cash was THB 2.1 billion, increasing by THB 475 million at the beginning of the year attributed to net cash from operating activities of THB 292 million. Net cash from investing activities of THB 140 million and net cash used in financing activities of THB 10 million. Lastly for the CapEx for this quarter, the company recorded THB 390 million for purchases in PPE as well as other investments. Lastly, for the debt structure, the company has a total outstanding debt at THB 18 billion. On the right-hand side, which displays the breakdown by currency, which Thai baht is equivalent to 78%, euros for 22%. For the portion of our breakdown interest, our floating rate was 90%, while fixed was 10%. On the bottom, the company has a total interest-bearing debt of THB 19 billion for the second quarter of 2024 and net interest-bearing debt to equity ratio at 0.51x, an increase from 0.5x at the end of 2023. So moving on to the operating rational sites for financial services business, first at the insurance business under Rabbit Life. In this quarter, Rabbit Life ranked in at #1 in terms of market shares for new business premiums via digital platform sales and remained #16 in market share in terms of total premiums. Once again, for 2024, Rabbit Life has set new targets to reach a total gross premium of THB 2.8 billion to THB 3 billion and has already bought THB 1.3 billion in terms of total gross premiums, achieving 45% of its entire -- intended targets already. Another goal of Rabbit Life has set is to recruit an additional 1,000 agents by the year end of 2024. Additionally Rabbit Life's campaign under Rabbit Life MYRewards is currently ongoing. It is the collaboration with Rabbit Rewards, where customers can receive additional Rabbit Reward points when purchasing Rabbit Life Insurance products. For every THB 250 on Rabbit Life's first year premiums bought, customers who received 1 Rabbit point from the Rabbit Rewards application, they can be exchanged for other F&B and lifestyle vouchers. On the right-hand side, you'll see that Rabbit Life's next third quarter outlook would be categorized into 4 different types. The first one is the sales and products. Rabbit Life are currently working on new product expansions, which is expected to launch within the third quarter to provide more variety to its consumers. The second one is for investments. Rabbit Life is currently working on offering loan projects to its existing customers in order to improve its overall yield. For operations and IT. Continuous improvement has been done by Rabbit Life to enhance the overall look and feel of its website. Lastly, for Others, there are new major collaboration projects planned, and they have plans to launch new merchandise and art toys. Moving on to the revenue side, breakdown for this quarter. The insurance segment bought in THB 222 million and the breakdown consisted of premiums earned THB 144 million, investment income and others at THB 78 million. A year-over-year comparison below exhibits, the premium grew by 18% year-over-year to THB 144 million and the breakdown comparison by premium types consisted of first year premiums, which increased by 33% to THB 57 million meanwhile renewal premiums decreased -- pardon me increased by 10% to THB 8 million. The breakdown channel by types on your right-hand side shows that Rabbit Life's premiums increased over to leveraging the synergy from BTS Group's affiliate networks under its 3M platform under the MATCH business. Meanwhile, on the upper right-hand side, the investment income and others for this quarter grew by 15% to THB 78 million. Moving on to the other side of the financial services, which is the NPA and NPL portfolio under Prime Zone Asset Management. As of the second quarter of 2024, Prime Zone joined the NPL auction and acquired 2 new portfolios with the principal balance of THB 89 million, now bringing its total NPL portfolio value at THB 1.6 billion at the total acquisition price of THB 966 million. In terms of performance, Prime Zone reported a total revenue of THB 27 million in this quarter and recorded its total cash collections from its NPL and NPA management business in the amount of THB 31 million. Towards the right-hand side, you can see Prime Zone's NPA portfolio lot consist of 20 assets at a total cost of approximately THB 70 million. Lastly, for the Asset Management Business under Metha Asset Management Company, let me just reiterate once again. As part of the company's expansion towards the financial services last year in November 2023, the company acquired a 50% stake in Metha Asset Management Business, a private fund management company. Metha is a licensed asset management company based in Thailand, boasting over 20 years of experience with a diversified portfolio, spending over 100 companies. Metha's also set an ambitious long-term goal of achieving THB 10 billion in AUM and has already achieved its goal during the second quarter of 2024. Metha was able to strategically capitalize on new opportunities, leveraging from both Rabbit Holdings and BTS Group's 3M platform under the MATCH business. This will provide a synergistic avenue for growth through its affiliate networks of companies through the sharing economy concept where BTS Group provides a unique MATCH solutions to its partners, sharing access to both its MOVE and MIX networks. Now I'd like to pass on to my colleague, who will take you through the real estate performance for this quarter. Thank you.

Thank you, [indiscernible], and good morning, everyone. We are moving to the real estate business segment. In terms of original keys in this year, there were INR 1,692 keys and 127 keys for owned hotel and operation leased hotel, respectively. Therefore, the total operational keys were 1,819. For this year, the hotel segment revenue was THB 620,000 -- sorry, THB 630 million, increasing by 93% year-on-year, mainly due to the recovery of sector. In type of revenue breakdown in the second quarter '24, the owned hotel and operating lease hotel were 91.9% and 8.1%, respectively. Apart from 1,819 of owned and operating leased hotels, there are 78 pending keys so the total keys 1,897 keys for hotels in Thailand. Total revenue was THB 533 million, comprising of THB 483 million from owned hotel and THB 50 million from operating leased hotel. Gross operating profit margin was 36.4%, decreasing from 33.1% year-on-year. Hotel occupancy rate increased to 74.5% in the second quarter '24 compared to 54.7% in the second quarter last year, outperformed the overall industry occupancy rate within Thailand, at 70% risk decreased from last quarter. For hotels in Europe. Total revenue was THB 90 million, increasing from THB 51 million quarter-on-quarter despite the divestment of hotel in Europe. Gross operating profit margin was 32.2%. The occupancy rate increased to 51.8% due to the seasonality terms in line with the European market with the improvement of average daily rate at 2,296 mark. For the rental segment, this segment comprises of our office building located in London, such as the 33 Gracechurch and Noble Commercial Building; TST Tower and Unicorn in Bangkok apart or -- sorry apart from office buildings, we have commercial buildings under the rental business. Therefore, the overall net floor area was 51,603 square meters with overall occupancy rate at 62%. The right-hand side, the overall breakdown of revenue by office building amounted to THB 89 million in this quarter. Additionally, our owned European hotels have been changed to operating leased from the partial disposal of our overseas hotel and going forward, can expect to receive a rental fee of around THB 666 million per year. For the residential segment this quarter under JV with SANSIRI. There is currently one condominium project on sale ready-to-move-in THE LINE VIBE, whereas one more project is currently in the development phase, which is the LINE SATHORN. So total presale backlog amounted to THB 2.1 billion. And in this year, the presale backlog amounted to THB 1,676 million solely from the LINE VIBE. The Langham Custom House Bangkok luxurious 5-Star hotel project in a rare, historic, colonial-era heritage building along the Chao Praya Riverside. This project consists of 8,240 square meter with 37% progress of construction. The next project is The Residences 38, an upscale residential project located in Bangkok District -- sorry, located in Bangkok Thonglor district, Sukhumvit 38. This building consists of 36 floors with 54% progress of construction which is our combination of serviced apartments, residential condominium and F&B retail stores. In 29,932 square meter gross floor area, expected period of completion by 2025. The project highlights are: Ananda Development has been appointed as developer to oversee the construction, development and sales planning of the project, consisting of 36 floors, first, 11th floor for facility/amenity, including a gym and swimming pool, a retail floor from level 12 is F&B, which will be operated and managed by Rabbit Holdings. Third, starting from Level 12 to Level 23 will be the serviced apartments, which will be operated and managed by the Ascott under the name La Clef Bangkok, by The Crest Collection, marketing under debut of The Crest Collection in Thailand, and from Level 24 to Level 36 will be Residential condominium under the name The Residences 38. That is a total of 171 units, 115 units among them being serviced apartments and 56 units being condominium. The total project cost is THB 4.9 billion with already THB 2.5 billion invested, also additional THB 2.4 billion remaining. Source of funds, a combination of bank loans and shareholder loans and also cash cycle. The project time line below shows that we have started redevelopment of the project in the second quarter of 2023 and by the fourth quarter 2023 they will be more sales and marketing announcements of the project. Lastly, the serviced apartments preopening is expected to launch by the first quarter of 2025. So these are our update of Rabbit Holding for analyst meeting in second quarter this year.