BEM– Growth continuing

BEM reported 3Q24 earnings of Bt1.1bn, up 10% QoQ and 6.4% YoY, in line with INVX and consensus. In 4Q24F, we expect YoY growth on higher MRT ridership and average fare with a slip QoQ on lack of dividend income. We have lowered our MRT ridership assumptions, which brings our 2024F down by 4.5% and 2025F by 5.3%.

The change in forecast has limited impact on TP as we also roll valuation base to 2025. We maintain OUTPERFORM with an SOTP-based TP Bt10.5/sh (Bt8.2/sh for core business, Bt1.5/sh for the Orange Line and Bt0.8/sh for investment in TTW and CKP). We continue to like BEM as earnings continue to grow and it has potential upside from the double deck project, which has not been included in our forecast.

Recap 3Q24 results. BEM reported net profit of Bt1.1bn, up 10% QoQ and 6.4% YoY, lining up with INVX and consensus. Expressway revenue (57% of total revenue) was Bt2.3bn, up only 1% YoY on partial closure of its expressway network and up 7.6% QoQ on higher traffic from fewer holidays than in 2Q24. Rail revenue (44%) was Bt1.8bn, increasing 7.9% YoY and 11.2% QoQ, both growths driven by higher MRT ridership. Revenue from commercial development (8%) was Bt308mn, up 10.4% YoY and 0.7% QoQ, on higher advertising and Metro Mall rental revenue. 9M24 accounted for 73% of our full-year forecast before revision.

Expect 4Q24F earnings to grow YoY, but drop QoQ. We expect earnings to grow YoY in 4Q24F on rising MRT ridership and higher average fare. We expect a QoQ drop as there will be no dividend income booked in the quarter.

Revise 2024-2025F down. We lowered our 2024F earnings by 4.5% to Bt3.8bn (+10.4% YoY) to reflect weaker-than-expected MRT ridership growth. In 10M24, BEM reported daily average ridership of 423k, growing 10% YoY vs our forecast of 15%, which led us to lower our assumption to 10%. This sliced 5.3% off 2025F earnings to Bt4.3bn (+12.9%). We keep our expressway traffic assumption, as 10M24 was in line with our forecast of 0%.

Key takeaways from analyst meeting. BEM hosted an analyst meeting yesterday. Its tone was neutral. Management said some clarity on the double-deck project should be seen in 1Q25, a slightly delay from 4Q24 due to government processes. The eastern part of the Orange Line is expected to be completed in late 2027; investment to date is Bt4.4bn. In 2025, management expects expressway traffic to return to growth as the impact from the partial closure of its expressway network will end in mid-2025. It expects MRT ridership growth of 5-10% in 2025 which is in line with our forecast of 7.5% growth.

Risks and concerns. Key concerns are the recovery of expressway traffic and MRT ridership. Key ESG risk for BEM is travel safety. A perception of lack of safety would reduce the number of people using expressways and MRT. This would lead to downside to our earnings forecast.