3BBIF - 4Q24: In line with expectations

3BBIF reported 4Q24 core profit of Bt1.5bn, up 2.4% YoY and 3.2% QoQ, lining up with our forecast. The fund announced a capital reduction of Bt0.16/sh, also as expected. We therefore are neutral on 4Q24 results. We maintain our tactical recommendation of NEUTRAL but raise our DCF-based end-2025 TP to Bt7.1 from Bt7.0 (5.3% WACC and 0% LTG) to reflect lower financing cost after debt refinancing. Our TP would be Bt6.1 if the contract is not renewed. Despite the benefit from debt refinancing, we see little price upside because of the fact the return to unitholders is still in form of capital reduction.

4Q24 core profit in line. 3BBIF reported a net profit of Bt3.3bn, up 584.1% YoY and 182.9% QoQ. The fund booked Bt1.8bn unrealized gains on investment (non-cash) in the quarter. Stripping this out, core profit was Bt1.5bn, up 2.4% YoY and 3.2% QoQ. The YoY and QoQ growth were derived from lower interest expense after the BoT cut policy rate by 25bps in Oct 2024. The fund announced a capital reduction of Bt0.16/unit instead of a dividend due to negative retained earnings. XN is on Feb 18. It reported 2024 core profit of Bt5.9bn, down 24.9% YoY, which was in line with our expectations.

Highlights.
1) Total income was Bt1.9bn, relatively flat YoY and QoQ as there was no new asset injected into the fund and its income stream is stable.
2) Total expenses were Bt357mn, down 4.5% YoY and 13.1% QoQ. Fund management fees and expenses came in at Bt24.1mn, decreasing 3% YoY, but rising 1.1% QoQ. Operating expense was Bt129.9mn, up 9.9% YoY, but down 25.2% QoQ (composed of OFC maintenance expense of Bt109.6mn, right-of-way expense of Bt18mn and insurance expense of Bt2.3mn). Interest expense was Bt199.7mn, down 11.9% YoY and 4.9% QoQ. Other expenses were Bt3.3mn, decreasing 18.5% YoY and 1.2% QoQ.

Fine-tuning assumptions. 3BBIF just announced that it has refinanced half of its debt (Bt5.5bn) to SMBC from BBL which will lower its cost of funds to 3.5% per annum from 6.9%. However, the fund will have to make a Bt163.5mn prepayment fee to BBL and a Bt38.2mn front-end fee to SMBC. This will be booked in 1Q25 as an expense. Based on this, we revise up our 2025F earnings by 3.8% to Bt6.2bn and by 7.1% in 2026F to Bt6.6bn. This will bring its 2025F DPU to Bt0.65 from our earlier Bt0.64 and Bt0.68 from Bt0.66 in 2026F.

Expect 1Q25F core profit to drop YoY and QoQ. The one-time expense related to debt refinancing is expected to pull 1Q25F core profit down YoY and QoQ.

Risks and concerns. Rising bond yield, which makes the fund’s yield relatively less attractive.

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