3BBIF reported 3Q24 core profit of Bt1.5bn, flat QoQ, but down 24% YoY, lining up with our forecast. The fund announced a capital reduction of Bt0.16/sh, also as expected. We therefore are neutral on 3Q24 results. We maintain our tactical recommendation of NEUTRAL with a DCF-based end-2025 TP of Bt7.0 (5.4% WACC and 0% LTG). Our TP would be Bt6.0 if the contract is not renewed. We believe the return to unitholders in the form of capital reduction caps near-term upside.
Research
3BBIF - 3Q24: In line with expectations
3Q24 core profit in line. 3BBIF reported a net profit of Bt1.2bn, turning around from Bt305mn losses in 2Q24 and Bt10.3bn losses in 3Q23. The fund booked Bt300mn unrealized losses on investment (non-cash) in the quarter. Stripping this out, core profit was Bt1.5bn, flat QoQ, but falling 24% YoY on lower rental income after the amendment of lease terms in 3Q23. 9M24 core profit accounted for 76% of our full-year forecast, on track. The fund announced a capital reduction of Bt0.16/sh instead of a dividend due to negative retained earnings. XN is on Nov 13. At end- 9M24, its capital reduction already amounts to Bt0.54/sh which is 78% of our full-year forecast of Bt0.69/sh. This should also be on track as we expect the capital reduction in 4Q24F to be the same as 3Q24’s at Bt0.16/sh.
Highlights.
1) Total income was Bt1.9bn, flat QoQ, but falling 19.4% YoY due to the amendment of lease terms in 3Q23 that cut rental income.
2) Total expenses were Bt410.6mn, up 6.1% QoQ and 3% YoY. Fund management fees and expenses came in at Bt23.9mn, down 2.5% QoQ and 15.6% YoY. Operating expense was Bt173.5mn, up 20.4% QoQ and 23.4% YoY (composed of OFC maintenance expense of Bt109.7mn, right-of-way expense of Bt32.4mn, insurance expense of Bt2.3mn and expense and rental fee relating to subduct for the OFC relocation of Bt29.2mn). Interest expense was Bt209.9mn, down 1.6% QoQ and 6.3% YoY. Other expenses were Bt3.3mn, decreasing 37.5% QoQ and 40.9% YoY.
Expect 4Q24F core earnings to be flat QoQ and YoY. YoY growth will start to flatten as the impact of the lease amendment ended in 3Q24, implying no change in income base, while QoQ should also be flat, reflecting its stable income stream.
Risks and concerns. Rising bond yield, which makes the fund’s yield relatively less attractive.