BTS - 2QFY25: Bigger net loss, raise FY2025 loss

BTS reported a 2QFY25 net loss of Bt456mn sinking from a Bt257mn profit in 2QFY24 and a Bt382mn loss in 1QFY25. In 3QFY25, we expect core earnings to fall YoY, but improve QoQ. The tone at the analyst meeting was slightly positive on the approach of the first installment of the BMA debt repayment of ~Bt12bn (Jan 22, 2025 deadline), which will help boost near-term sentiment. We keep our fundamental tactical recommendation at NEUTRAL with a new SOTP-based TP of Bt5.3 (from Bt5.1) after factoring in the recent RO, higher stake in ROCTEC and RABBIT, higher VGI share price and new earnings assumptions.

Recap of 2QFY25. BTS reported a 2QFY25 (Jul-Sep 2024) net loss of Bt456mn, sinking from a Bt257mn profit in 2QFY24 on losses from the Pink and Yellow lines and lower construction income, and worsening from the Bt382mn loss in 1QFY25 on higher losses at RABBIT, specifically Rabbit Life, and FX loss. Excluding RABBIT, performance was better QoQ on higher ridership on the Pink and Yellow lines. Total revenue was Bt4bn, slipping 0.2% YoY on less construction income for the Pink and Yellow lines as construction is completed on both, and rising 6.1% QoQ on higher farebox revenue on Pink and Yellow lines and media revenue at VGI. 1HFY25 results were weaker than expected: we had assumed a FY2025 net loss of Bt795mn but first half losses are already at Bt838mn.

Expect 3QFY25F core earnings to fall YoY, but improve QoQ. YoY growth will continue to weaken on losses from the Pink and Yellow lines. QoQ, we expect to see improvement via a smaller loss at Rabbit Life and lower FX loss (baht depreciation QTD) at RABBIT. Additionally, we expect stable operations at the Pink and Yellow lines as ridership QTD is relatively flat from 2QFY25.

Key takeaways from analyst meeting. BTS hosted an analyst meeting yesterday. Its tone was slightly positive regarding the BMA debt repayment, with a Jan 22, 2025 deadline. Certainty on payment would give a near-term boost to share price. Currently, the matter is still with the Bangkok Council. BTS says the BMA has sufficient funds to pay the first installment of ~Bt12bn. For the remaining debt, BMA is studying ways to settle with BTS.

Fine-tuning assumptions. We fine-tune our assumptions to reflect the recent rights offering and tender offer for ROCTEC at Bt1/sh and RABBIT & RABBIT-P at Bt0.6/sh plus the weaker 1HFY25 performance. We raise our expected FY2025F net loss to Bt1.2bn from Bt795mn and lower FY2026F to a Bt416mn loss from a Bt218mn profit. Note that BTS shareholders over-subscribed to the rights offering, giving proceeds of Bt13.2bn. It then spent Bt7.1bn on the tender offer, leaving Bt6.2bn to be used for debt repayment and as working capital. After the transaction, BTS holds 63.2% in ROCTEC (from 17.3%) and 65.4% in RABBIT & RABBIT-P (from 47.7%).

Risks and concerns. Slow ridership growth in the Pink and Yellow lines. ESG risk for BTS is service reliability which could negatively impact ridership.