BTSGIF – 2QFY25: Core profit on track

BTSGIF reported 2QFY25 core profit of Bt1.1bn, down 11.9% YoY on higher maintenance costs, but up 10.5% QoQ. Core profit in 1HFY25 is on track to meet our full-year forecast and we leave it unchanged. In 3QFY25F, we expect core profit to improve QoQ and YoY. We maintain our NEUTRAL rating and end-FY2025F DDM-based TP of Bt3.9/sh (5.9% WACC and no terminal value).

We believe near-term upside to share price is limited as it continues payouts to unitholders in the form of capital reductions instead of dividends plus there is lack of clarity regarding cash flow after Dec 2029. Additionally, we do not expect to see concrete details for at least the next three months on a potential concession buyback, which would be a plus for BTSGIF.

2QFY25 results on track. BTSGIF reported a 2QFY25 (Jul–Sep 2024) net profit of Bt271mn, turning from a Bt225mn loss in 2QFY24, but falling 34% QoQ. In the quarter, the fund booked Bt790mn unrealized losses on investment (non-cash). Stripping this out shows a core profit of Bt1.1bn, down 11.9% YoY on higher maintenance cost, but up 10.5% QoQ, backed by higher ridership. 1HFY25 core profit accounts for 50% of our full-year forecast, keeping it on track. The fund announced a capital reduction of Bt0.2/sh (6.1% yield) with XN on Nov 25.

Highlights:

1) Farebox revenue was Bt1.8bn, up 2.9% YoY and 8.9% QoQ. The YoY and QoQ growth were underwritten by higher ridership.

2) Operating and maintenance costs came in at Bt677.2mn, surging 41.1% YoY and up 6.3% QoQ. Behind this was higher maintenance expenses for rolling stock refurbishment and for civil work and property insurance premiums paid in the quarter.

3) Ridership and average fare updates. In 2QFY25, ridership was 52.5mn trips, increasing 5.7% YoY and 9.8% QoQ. Average fare was Bt33.2/trip, decreasing by 2.6% YoY and 0.9% QoQ from monthly package promotions.

3QFY25F (Oct–Dec 2024) earnings outlook. We expect BTSGIF to report YoY and QoQ growth in core profit. Undergirding the YoY growth will be rising ridership with QoQ growth from lower maintenance cost. In 3QFY25F, we expect ridership to be relatively flat QoQ due to more holidays in Dec.

Keep FY2025F assumptions. We keep our FY2025F core profit of Bt4bn, down 12.8% YoY. Although we expect ridership to grow by 6.5% to 249mn trips and average fare to rise 5% to Bt33.5/trip, the 48% YoY growth in opex, largely reflecting maintenance cost, will drag on YoY core profit.

Risks and concerns. The uncertainty over the long-term revenue visibility of the fund is unclear as the current contract for the fund ends in Dec 2029. Key ESG risk for the fund is the service reliability.