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Edited Transcript of BTS.BK earnings conference call or presentation 19-Aug-19 7:00am GMT

Q1 2020 BTS Group Holdings PCL Earnings Presentation

Chatuchak Sep 12, 2019 (Thomson StreetEvents) -- Edited Transcript of BTS Group Holdings PCL earnings conference call or presentation Monday, August 19, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Ross

BTS Group Holdings Public Company Limited - CIO & Head of IR

* Kiewkhong Sinatta

BTS Group Holdings Public Company Limited - IR Associate Director

* Sataporn Vongphaibul

* Siriphen Wangdumrongves

* Surapong Laoha-Unya

BTS Group Holdings Public Company Limited - Executive Director

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Conference Call Participants

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* Edward Chau

* Kredrada Benjaathonsirikul

* Nantarach Atthawong

* Nelson Leung

* Yan Lee

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Presentation

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Surapong Laoha-Unya, BTS Group Holdings Public Company Limited - Executive Director [1]

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(foreign language)

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Daniel Ross, BTS Group Holdings Public Company Limited - CIO & Head of IR [2]

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Good afternoon, everyone. Welcome to the first quarter analyst meeting. Let me start by introducing our new team member (inaudible) who looks after U City Investor Relations. Going forward, we'll go straight into the highlights for the quarter.

On the P&L side, you can see that we've had actually a very strong quarter both in terms of top line EBITDA and recurring profit with 194% increase in operating revenue to THB 9 billion, a 44% increase in operating EBITDA to THB 1.6 billion and net recurring profit of THB 1 billion, up 113% year-on-year.

On the balance sheet side, we've seen that strengthen further. Immediately, you see cash and liquid investments are now at THB 32 billion, which is more than THB 13 billion up compared to 3 months earlier. And leverage remains very relatively low at adjusted net D/E of 0.82x.

On the cash flow side, you'll see later on that it's been dominated by cash flow from financing, the Green Bond issuance around THB 13 billion; some warrant proceeds from VGI, THB 3.8 billion. And most of that was -- a lot of that was invested within the Pink and the Yellow Lines as well as the Green Line extensions. So invested in around about THB 5.9 billion.

So those are the sort of overall highlights of the quarterly results. In terms of our typical P&L snapshot, you see operating revenue, as I mentioned, up 194% to THB 9 billion. The key components to that increase, as usual, in the graph in the bottom right-hand corner, THB 5.4 billion of the increase coming from the Mass Transit business, THB 245 million come from Media business and THB 358 million from the Services business.

Operating EBITDA, as I mentioned, 44% up; accounting EBITDA, up 86%; and net income, THB 894 million or up 131%. So the year-on-year numbers all look very, very strong, even Q-on-Q despite a slight slowdown in some of the booking of the Mass Transit revenue. The accounting net profit and recurring net profit, net income numbers are all up Q-on-Q.

Margins, as you all know, just simply follow the trend generally of the proportion of business. So we've seen a dilution of margins year-on-year significantly due to the higher components of Mass Transit construction income. But actually, Q-on-Q, we've seen a slight increase in the margins.

Contribution of revenue, Mass Transit around 79%. I think that was about 80 -- 82% last quarter, so down slightly but still the dominant contributor of the revenue.

On to the next slide. The cash flow, which I touched on earlier. Beginning cash, THB 4 billion; ending cash, THB 15 billion. Generally speaking, you've seen cash flow -- cash used in operations of around THB 3 billion. And that's, remember, including about THB 2.4 billion investment in some of the Mass Transit lines.

On the investing cash flow, you see the key items there which contribute to a THB 3.6 billion use of cash, investing in the Pink and Yellow Lines, THB 3.5 billion plus acquisitions for current and long-term investments of THB 3 billion, offset through the sale of the investment in Bayswater land for about THB 2.3 billion. But the 3 months dominated by the financing cash flows that you can see in green. Green Bond, THB 13 billion. Loans from financial institution increases. We've drawn down the loan for the Pink and the Yellow Lines. We've mentioned earlier the sale of VGI shares as well as some of the warrants. We've also received some cash from BTS-W4 in the first 3 months around about THB 580 million. Since then -- but that one showed to the next quarter. Obviously, we see it significantly more closer to THB 6 billion additional. But that will be shown in the next quarterly results. And some net cash paid for short-term loans around THB 3.9 billion, leaving ending cash, as I say, THB 15 billion, which excludes the THB 17 billion liquid investments, taking the total cash and liquid investments available to us at THB 32 billion.

Handing over now to Jane. Thank you.

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Sataporn Vongphaibul, [3]

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Thank you, Khun Daniel, and good afternoon, everyone. As usual, we'll begin the segmental performance with the Mass Transit business on Page 7. Our Mass Transit business got a good start since the first quarter of this fiscal year with a total Mass Transit revenue of THB 7.2 billion. This represents a significant increase of 298% year-on-year or THB 5.4 billion.

As you can see from the pie chart on the top right-hand side, 60% of our Mass Transit revenue was from construction revenue for the Pink and Yellow Lines, which was recorded by THB 4.3 billion in this quarter; followed by 19% from services revenue for the provision of E&M works and the train procurement service for Green Line extensions of THB 1.4 billion, which increased by 48% or THB 444 million. And another 12% was from O&M revenue, which rose by 84% year-on-year or THB 378 million to THB 830 million, mainly driven by the full operation of the Southern Green Line extension since December 2018.

For the cost side, Mass Transit cost also increased by THB 4.8 billion to THB 5.9 billion chiefly from the recognition of construction cost for the Pink and Yellow Lines.

Operating EBITDA margin in this quarter declined to 18.3% from 38.7% in the previous year as a result of the aforesaid construction services as well as the provision of E&M works and train procurement service, which have lower margin. But if we exclude these revenue costs and interest income, operating EBITDA margin for the Mass Transit business will be 67.8%.

Moving on to Media business on Page 8. Our Media business also had an impressive performance since the beginning of the new fiscal year as well. Media revenue increased by 22% or THB 245 million year-on-year to THB 1.4 billion. The growth was supported by higher revenue in the Digital Services segment. If you see on the pie chart on the top right corner, 32% of total Media revenue or THB 435 million was from Digital Services business. The increase in Digital Services revenue was increased significantly by 298% year-on-year or THB 326 million mainly from the full quarter consolidation of Trans. Ad Group by MACO as well as higher revenue from project management fees and higher lead generation fees from the Rabbit Group.

For Out-of-Home media, it contribute another 68% of total Media revenue or THB 928 million, which decreased by 8% or THB 81 million year-on-year. The decline in Out-of-Home media revenue was from the continued digital transformation strategy of VGI by converting its static media assets on BTS stations and street furniture of MACO to digital screens.

For the cost side, cost of sales increased by 69% year-on-year from THB 309 million to THB 521 million mainly from the full quarter consolidation of Trans. Ad Group. Operating EBITDA margin for our Media business in this quarter declined to 46.2% from 55.1% in the previous year mainly from the consolidation of Trans. Ad Group, which have lower margin than Other Media segments.

And next, move on to the Property business. Total Property operating revenue in the first quarter was THB 79 million, a decrease of 2% year-on-year or THB 1 million. And total Property operating revenue now mainly comprised of -- mainly driven by the Commercial Property revenue, which now comprised of revenue from Thana City Golf & Sports Club.

Total operating costs also declined by 19% year-on-year or THB 13 million to THB 55 million. And in this quarter, we recognized the share of net profit from investment in U City of THB 193 million compared to a share of net loss of THB 8 million in the previous year mainly from the transfer progress of Sansiri JV.

Moving on to the financial position. Total assets as of 30th of June 2019 stood at THB 172 billion, an increase of THB 27 billion or 19% from 31st of March 2019. The increase was chiefly from an increase in cash and cash equivalents of THB 11 billion, an increase in receivables from the exercise of BTS-W4 on the 28th of June of THB 6.4 billion, an increase in receivables related to the Mass Transit of THB 5.4 billion as well as an increase in other long-term investment of THB 3 billion. The increase was partly offset by a decrease in advance to contractors and for acquisition of asset of THB 1 billion.

Total liabilities increased by 15% from 31st of March or THB 14 billion to stand at THB 106 billion mainly from an increase in long-term debentures due to the newly issued THB 13 billion Green Bond debentures in May 2019 as well as an increase in long-term loans from financial institutions of THB 4.5 billion mainly from the drawdown of syndicated loans related to the Pink and Yellow Lines. However, the increase was partially offset by a decrease in short-term loans from financial institutions and bills of exchange payables of THB 3.9 billion.

Total equity increased by THB 13 billion or 25% year-on-year from 31st of March 2019 to THB 65 billion mainly from an increase in equity from the exercise of BTS-W4 of THB 6.4 billion as well as an increase in surplus from the changes in the ownership interests in subsidiaries of THB 3.4 billion and an increase in noncontrolling interest in subsidiary of THB 1.5 billion mainly from the decrease in our shareholding in VGI from 70.5% to 65.1%.

The adjusted net debt-to-equity in the first quarter was at 0.82x from the adjusted net debt of THB 53.7 billion. Next, Khun Sinatta will update on the Mass Transit business. Thank you.

(presentation)

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Kiewkhong Sinatta, BTS Group Holdings Public Company Limited - IR Associate Director [4]

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So as you've seen in the video, also on the 9th August, we, together with the BMA, began to have operation of the first station of the modern Green Line extension at Lad Prao Intersection station. So at the year-end, it was a great honor for us to have the Prime Minister Prayut presided over the opening ceremony. Currently, passengers can arrive from Mo Chit station to this Lad Prao Intersection station for free.

In addition to the first station, we expect the opening of other 4 more station, which is up to Kasetsart University station by the end of this year. And we strongly believe that the opening of these first 5 stations in this fiscal year, [definitely] add addition of passengers to our network and also significantly support our O&M revenue. And the full operation of this entire route from Mo Chit to Khu Khot is expected in next year. And in parallel to the Northern Green Line progress, the construction of the Pink and Yellow Lines also continue as planned with 38% civil work completion and 27% accomplished for E&M works. We maintain our target to begin the commercial operation for both main lines in 2021 in October.

Then moving on to the trains progress, the 46 new trains delivery. 20 trains from Siemens and 4 trains from CRRC have arrived and partially put in the services. Clearly, our fleet has now expanded to 67 trains compared to 52 trains in the last 4 years and is expected to reach 98 trains in 2020.

And this slide regarding the intercity motorway project, BSGR (sic) [BGSR] joint venture, which is a joint venture between the company, BTS, Gulf, STECON and Ratchaburi with share proportion of 40%, 40% and another 10% and 10%, respectively. We have submitted its bid for intercity projects to the Department of Highways in June.

And the projects cover 2 routes. The first one is from Bang Pa In to Nakhon Ratchasima or called M6 covering 196 kilometers long. And the other route is from Bang Yai to Kanchanaburi or M81, 96 kilometers in length. And then another 2 consortiums submitted to both BEM Group and the UNIQ-CCCC Group. All 3 consortiums pass the technical qualification. And just yesterday, there was the announcement that BGSR JV was the best bidder for this project. So after this, we will have the discussion with the related parties and wait for the cabinet approval. We expect the contract awarded by the end of this year or early next year and expect the operation for both lines in 2023.

And next slide shows our scope of works. So in the first 3 years of design and construction works. What we have to provide is to design and construct the toll collection system, the traffic management control system and other related infrastructures. And the next phase is to do the operation and maintenance for another 30 years.

So that's all for the Mass Transit update. I'll pass to Khun Nantarach for Media update. Thank you.

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Nantarach Atthawong, [5]

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Thank you, Khun Sinatta. For VGI, only 4 months after the acquisition of Plan B, both VGI and Plan B has already launched one of the synergies by combining more than 80% of both company digital Out-of-Home screens throughout Bangkok known as Bangkok Takeover. So let us show you the video of this campaign.

(presentation)

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Nantarach Atthawong, [6]

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Bangkok Takeover will paint exclusive advertising for 1 hour prime time per month, which cover in transit media channels and allowing the advertiser to create and impact with over 9 million eyeballs. Moreover, this package is now fully booked end of this year.

So next, we successfully established the joint venture with V-Click Technologies Company Limited. And recently, VGI and iClick cohosted an industry event, unlocking THB 580 billion Chinese traveler market. So let us show another video to give you a short scenario about the event.

(presentation)

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Nelson Leung, [7]

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And today for the joint venture partnership with iClick Interactive, VGI has established a new company called V-Click Technologies that will help our consumers to basically target their product more efficiently into the social network in China.

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Yan Lee, [8]

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Okay. When Chinese decide to leave the confines of China itself, the #1 destination that they would like to visit is Thailand. So at 11 million, close to 11 million travelers last year coming to Thailand especially in Bangkok. And on average, they spend about THB 53,000 to THB 54,000. That gives us a total opportunity of about THB 580 billion spent in Thailand on Thai businesses today.

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Kredrada Benjaathonsirikul, [9]

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(foreign language)

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Edward Chau, [10]

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Very strong key strategic partners of V-Click. In China, we've got the king of social, Tencent; the king of travel, Ctrip; the king of lifestyle, Meituan Dianping; and the king of social commerce, RED Xiaohongshu; and of course, Baidu Search and (inaudible) KOL. That makes V-Click your perfect partner to unlock this THB 580 billion opportunity.

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Nantarach Atthawong, [11]

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For V-Click, we have to provide its clients with comprehensive insight and ability to deepen their engagement with Chinese traveler, which come to Thailand around 11 million persons per year and spend around THB 58,000 per person. By using the suite of digital marketing technology that's on iClick, 780 million consumer profiles and with the strong partnership of iClick, including Baidu, Tencent, Ctrip, Meituan Dianping and RED will enhance the opportunity for the brands to create an impact to Chinese consumer. So for example, McDonald's Thailand using KOL, or key opinion leader, to advertise their new menu as you will see in the next video.

So move to the next sector is payment sector. After we entered into JV agreement with Saha Group, we have launched Lawson stores on 5 BTS stations, including Thong Lo, Ploen Chit, Saphan Khwai, Victory Monument and Bearing. Moreover, Saha Group also tied over 3,000 staff ID cards with Rabbit Card. Within the first quarter, the number of Rabbit Card reached 11.5 million cards and for Rabbit LINE Pay served more than 6 million users.

For next, I would like to pass to Khun (inaudible) for Property update.

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Unidentified Company Representative, [12]

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Thank you, Khun Nantarach. For Property update, in June and July 2019, U City has successfully acquired 19 hotels in Germany and Switzerland, including 1,792 operating keys for 17 hotels, which currently operating under arcona, arcona Living and Steigenberger brands, and another 251 pending keys for 2 projects under development, which these 17 hotels have been fully operated since May 2019 and has generated a total revenue of around THB 450 million or 20.7% of the operating lease hotel revenue as of the 30th of June 2019.

For Roi Chak Sam project. This is aimed to be a luxurious 5-star hotel locates on the Chao Praya Riverside in Bangkok. The project value is approximately THB 4.6 billion. Right now, new lease term is already signed and is during the planning stage.

This is the business update for U City. Now let me pass on to Khun Siriphen for BTSGIF update.

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Siriphen Wangdumrongves, [13]

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Thank you, Khun (inaudible). Good afternoon, everybody. Today, I will present the financial performance of BTSGIF for the first quarter of fiscal year 2019/'20.

In the first quarter, total income of the fund was THB 1,208 million, up 3.2% year-on-year and 21.8% Q-on-Q mainly from higher income from investment in net farebox revenue, which grew to THB 1,202 million. Total expenses of the fund were THB 23 million, down 29% year-on-year from lower incentive fee to be paid to BTSC. However, total expenses lost by 89% Q-on-Q as a result of lower expenses in the previous quarter from the reversal of incentive fee for BTSC in the previous quarter.

Net investment income was THB 1,185 million, up 4% year-on-year and 21% Q-on-Q. In this quarter, the fund recorded loss on valuation of investment of THB 300 million, which is noncash expense from the valuation in the fair value of investment in NRTA from the decrease in the remaining period of NRTA. The new fair value of investment in NRTA decreased from THB 59.1 billion in the previous quarter to THB 58.8 billion. Changes in this asset resulting from operation were THB 885 million.

For the income from investment in NRTA in the next slide. In this quarter, farebox revenue was THB 1.7 billion, up 3.7% year-on-year but down by 3.8% Q-on-Q. Year-on-year increase was from increase in ridership of 4.4% year-on-year to 59.6 million trips from the opening of Southern Green Line extension and the impact from recognition of free-trip allowance to passenger from train service disruption last year of around THB 19 million but partially offset by impact from free trip during the Royal Coronation Ceremony of King Rama X on 5th to 6th May this year of around THB 36 million. Farebox revenue without effect of free trip this year and last year increased around 4.7% year-on-year. Q-on-Q decrease was from lower number of weekday due to several holiday in this quarter, which is seasonal impact and fee trip to passenger.

For the O&M costs, O&M costs in this quarter were THB 498 million, increasing 5.5% year-on-year but decreasing 36% Q-on-Q. Year-on-year increase was principally from an increased CapEx. For example, rolling stock of THB 58 million and spare part of THB 19 million but was offset by staff cost which decreased by 13% year-on-year mainly due to lower allocation between core line and extension line from extension, expansion and lower maintenance costs from large overhaul last year and lower selling expense from higher [CSR] last year.

Q-on-Q decrease was largely led by higher CapEx in the previous quarter. In the previous quarter, the CapEx were automatic fare collection system upgrade of THB 225 million, rolling stock of THB 69 million and radio upgrade of THB 29 million. In addition, maintenance cost, insurance premium and administrative and other expense decreased from the previous quarter but partially offset by increased employee expense due to [were not paid] in this quarter.

Income from investment in NRTA was THB 1,202 million, up 3% year-on-year and 22% Q-on-Q. For the balance sheet as of 30th of June 2019, total assets stood at THB 60 billion. The main component were investment in NRTA of THB 58.8 billion, decreased by THB 300 million from last quarter; investment in security at fair value and cash outlay of THB 1.1 billion; and other asset of THB 142 million. Total liabilities stood at THB 12 million. Net asset value was THB 60 billion, equivalent to THB 10.3708 per unit. As of 30th of June, the fund had deficit of THB 412 million, decreasing from THB 1.3 billion in the previous quarter.

Next is the core network performance in the first quarter. Ridership in the first quarter was 59.6 million trips, including free trip during Royal Coronation Ceremony of King Rama X on 5th to 6th May 2019, of 1.1 million trips, up 4.4% year-on-year mainly from the full opening of Southern Green Line extension from Bearing to Kheha on 6th of December 2018, and low base last year due to train service disruption in June 2018. Comparing to the previous quarter, ridership was slightly down by 2.4% Q-on-Q from lower number of weekday due to several holiday in this quarter. For example, Songkran Festival, National Labor Day, Coronation Day, which is seasonal impact.

Average fare in the first quarter was THB 29.1 per trip, excluding free trip during Coronation Ceremony, up 0.1% year-on-year and 0.4% Q-on-Q. If including free trip during Royal Coronation Ceremony, the average fare would be THB 28.5 per trip. Average weekday ridership in the first quarter was 759,000 trips, increasing 5.5% year-on-year and 0.2% Q-on-Q.

For the distribution, as the fund had deficit of THB 412 million as of 30th of June. Thus, there will be no dividend payment in this quarter. However, the fund has cash from the operation during this quarter. Thus, the fund will distribute excess cash to the unitholder in the form of capital return. The fund announced the capital return for this quarter of THB 0.204 per unit. Book closure date is on 28th of August. And payment is on 11th of September.

For the distribution outlook for the fourth quarter of fiscal year 2018/'19, and the first quarter of fiscal year 2019/'20. The fund had deficit. Thus, the fund is unable to pay the dividend to the unitholder but pay in the form of capital return. However, from the second quarter of fiscal year 2019/'20 onward, the fund is expected to be able to pay the unitholder in the form of dividend and capital return. The capital return will be gradually paid to the unitholder until the end of concession agreement.

For the business update regarding Suksa Wittaya. For the construction of Suksa Wittaya station, BTSC has already received a construction permit from BMA in the beginning of August. The contractor has entered the site and will begin the construction following the plan. The construction will take about 18 months to complete and 2 months for installation of electrical and mechanical system, then estimate to be able to install it around early of 2021.

For Saphan Taksin Station, BTS finished the EIA report on February 2019. And in May, there was some comment from BMA. And BTSC is updating EIA report and expect to submit to BMA in this month. After that, BMA will submit the EIA report to ONEP for consideration.

That's all for BTSGIF. Thank you.