“BTS” and “Krungthep Thanakom” will negotiate a settlement of an outstanding account for operation and maintenance (O&M) of Green Line extensions this week. Amounting to over THB 14 billion inclusive of the capital and interests, executives are confident in Bangkok’s capacity to settle its debt, following a 100-day early delivery declared by Bangkok Governor “Chadchart Sittipunt”. Preliminary assessment by a brokerage company revealed 0.25 D/E ratio following the settlement with a positive outlook as Bangkok presses for payment, as well as its plan to repurchase concessions for the Green, Yellow and Pink Lines progresses.
Mr. Surapong Laoha-unya, Director of Bangkok Transit System Corporation Ltd. or “BTSC” and Chief Office of MOVE Business of BTS Group Holdings PCL told “Kaohoon” of an invitation letter issued by Krungthep Thanakom (“KT”) to BTS, with respect to the settlement of outstanding account for the operation and management (O&M) of the Green Line Extension 1: covering Saphan Taksin-Wongwian Yai-Bang Wa and Onnut-Bearing (from May 2019 to May 2021); and Extension 2: covering Bearing-Samut Prakan and Mo Chit-Saphan Mai-Koo Khot (from April 2020 to May 2022.)
KGI Securities (Thailand) PCL identified that an increase in BTS stock prices on September 6 was a key result of Bangkok Metropolis pressing for an appropriation of O&M payment to BTS within 180 days, with a firm belief that Bangkok will comply with the Supreme Administrative Court’s verdict without delay, as doing so will ensue even more interests detrimental to Bangkok Metropolis itself. BTS shall anticipate a healthier financial liquidity and repayment of other trade payables, provided the foregoing has been accomplished.
Nevertheless, Bangkok Metropolis may resolve its debt partially in cash while the remaining amount could be negotiated into an exchange of concessions to avoid any significant impact on its own liquidity. However, provided that the government plans to repurchase the skytrain concessions, it should be noted that BTS may look forward to selling such concessions back to the state, given the remaining 5-year contractual period of the main Green Line, while the Yellow and Pink Lines are expected to accrue more losses in the years to come.
BTS operational results are expected to recover due to its revenue in the subsequent two years, with a major factor, instead of the abovementioned settlement, being BTS relieving itself from losses incurred by its joint ventures, specifically the sale of its shares in Kerry Express (Thailand) PCL or KEX which is now held by BTS for less than 3 percent, with no further plan on investment. Hence, recommending investors to “Hold” BTS with a target price at THB 5.60 per share.
Mr. Korapat Worachet, Director of Investment Research and Service of Krungsri Securities PCL or KSS implies that the increase in BTS stock price on September 6 was supported by two key factors: Firstly, the settlement of debt by Bangkok Metropolis which will improve BTS financial liquidity.
Secondly, in pursuit of its 20-Baht fixed fee policy, the government plans to repurchase the skytrain concessions, whereas private sectors are likely to sell back to the government any lines with little remaining contractual period, as well as those with accrued losses. In other words, BTS is likely to consider the foregoing as its main Green Lines, commuting between Sukhumvit-Mo Chit-Onnut for a total distance of 17 kilometers, and Silom Line, between the National Stadium-Saphan Taksin for a total distance of 6.5 kilometers, have their remaining contractual periods of approximately 5 years and will be concluded on December 4, 2029, after which Bangkok Metropolis will execute a transportation service contract with BTS all the way to 2042.
In the meantime, the Yellow Line with its reach through Ladprao-Samrong and the Pink Line through Khaerai-Thonburi are likely to accrue more losses in the following years. Selling them back to public sectors while operating under a service contract should be consequently more beneficial to BTS, given the foregoing, BTS stock piques investors’ interest, suggesting a “buy” at THB 5.90 per share.
