The share price of BTS Group Holdings Public Company Limited (SET: BTS) rose 3.77% yesterday to settle at THB4.40 per share, the highest level in a month.
CGS International Securities (Thailand) (CGSI) expects that the nationalization of the mass transit lines is mostly positive on BTS, but still believes that the possibility of the nationalization of the green line core network is low given that the remaining Public-Private Partnership (PPP) net cost contract only has five years remaining. Based on the possibility, CGSI expects the Pink/Yellow lines to have a higher chance for nationalization than the Green line.
In terms of profit and loss, BTS will likely see an immediate lift in earnings, but the company will also be foregoing future profits.
CGSI wrote in a note, stating that the Pink/Yellow lines are still loss making for BTS with a net loss contribution of more than THB400 million in 1QFY3/25.
Although the value accretion for the BTS group depends on the final government compensation amount, we think BTS will also benefit from additional O&M contracts (as the government will still have to rely on BTS to run the train operation).
Based on CGSI’s DCF valuation, the firm values BTS equity stakes in the PPP net cost contracts Pink/Yellow lines at THB15.5bn/THB11bn respectively. Lastly, CGSI believes there is still a long way before this can be finalized.
