BTS Group Holdings: A Comprehensive Financial Analysis

Published by UOB Kay Hian, November 20, 2024

Introduction to BTS Group Holdings

BTS Group Holdings, a diversified conglomerate, specializes in the mass transit sector, with a strong focus on rail transport, media, digital services, and property businesses. Their strategic vision aims to enhance value through data integration and cross-business synergies, positioning them as a key player in Thailand’s infrastructure landscape.

Current Financial Position and Market Performance

As of the latest report, BTS Group Holdings maintains a ‘HOLD’ recommendation. The share price stands at Bt4.84, with a target price slightly lower at Bt4.79, indicating a potential downside of -1.1%. Over the past year, the stock has experienced significant volatility, with a 52-week high of Bt7.45 and a low of Bt3.72. Major shareholders include the Kanjanapas Group with a 31.60% stake, followed by THAI NVDR Company Limited at 8.38%, and UBS AG Singapore Branch at 5.95%.

Financial Highlights and Key Metrics

The company’s financial metrics reveal a challenging fiscal environment. For FY2025, BTS Group Holdings reported a net turnover of Bt14,921 million, a decrease from the previous year. EBITDA dropped to Bt1,736 million, while operating profit turned negative at Bt141 million. The net profit showed a significant loss of Bt1,477 million, a stark contrast to the previous year’s figures.

Challenges and Strategic Initiatives

BTS Group Holdings faces several hurdles, particularly with its Pink and Yellow Lines, which continue to be key drags on year-over-year performance. The company reported a 2QFY25 net loss of Bt456 million, escalating from a loss of Bt382 million in 1QFY25, and a marked decline from a net profit of Bt257 million in 2QFY24. Despite these challenges, there are expectations for reduced quarter-over-quarter losses from these lines, although year-over-year operations are likely to remain weak.

Restructuring and Financial Management

The completion of a rights offering (RO) transaction resulted in total proceeds of Bt13.2 billion. Of this, Bt7.1 billion was earmarked for a voluntary tender offer (VTO) for Rabbit Holding and Roctec Global, with the remaining Bt6.1 billion allocated for debt repayment and working capital. The company’s management holds firm beliefs in receiving operation and maintenance payments from the Bangkok Metropolitan Administration and Krungthep Thanakom, expecting a debt repayment of Bt14 billion by January 22, 2025.

Debt Management and Future Outlook

Efforts to deleverage have improved the adjusted net debt to equity ratio to 2.36x, down from 2.50x at the end of FY2024, with further improvements anticipated. Ridership on the Pink and Yellow Lines has shown quarter-over-quarter growth, but the company anticipates achieving breakeven levels within 2027-28, with a more conservative estimate extending to 2031 and 2033.

Valuation and Recommendation

Despite the narrowing loss projections for BTS, the report maintains a ‘HOLD’ rating due to the lack of significant share price catalysts and an unattractive valuation. The SOTP-based target price is set at Bt4.79. Key catalysts that could influence the share price include improvements in Yellow Line ridership and enhanced performance from associates and joint ventures.

Environmental, Social, and Governance (ESG) Considerations

BTS Group Holdings is committed to sustainable development, aiming for carbon neutrality and net zero status by 2050 and 2065, respectively. The company emphasizes social responsibility and good governance, having received an “Excellent” rating from the Thai Institute of Directors.

Conclusion

In summary, while BTS Group Holdings is navigating through financial challenges, strategic restructuring and management initiatives indicate a cautious optimism for future recovery. Stakeholders and potential investors should remain attentive to operational developments and market conditions that could impact the company’s performance.