BTS Faces Major Losses: Yellow and Pink Lines Dragging It Down Will New Ventures Succeed or Fail?
Manager Online, June 8, 2024, 06:43
Weekend Manager The BTS Group's attempts to strengthen its various business sectors including electric trains, advertising media, logistics, and e-wallets to boost the "Kanjanapas" family business have resulted in significant setbacks. The financial performance for the fiscal year 2023/2024 showed a loss of over 5 billion baht, causing a massive sell-off of BTS shares and driving the stock price to an 11-year low.
Not only has the main company, BTS, suffered, but its subsidiaries and business partners into which BTS has invested heavily are also plunging. As of June 4, 2024, BTS shares hit an 11-year and 6-month low, dropping 4.17% to 4.60 baht. VGI shares fell 4.00% to 1.44 baht, RABBIT dropped 13.16% to 0.33 baht, JMART declined 10.40% to 11.20 baht, JMT decreased 8.44% to 14.10 baht, and SINGER dropped 16.04% to 7.85 baht.
The substantial losses stem from heavy investments in other companies' shares to expand the business, impacting the 107,896 small BTS shareholders, the second-highest number after PTT with over 160,000 small shareholders. Most BTS small shareholders are now stuck with high-cost stocks, enduring significant losses.
Previously, BTS consistently paid high dividends for several years, attracting long-term investors. However, this year marks the first time BTS announced it will not pay dividends due to its financial losses, mainly resulting from its investment in Kerry Express (Thailand) Public Company Limited (KEX).
BTS invested in KEX shares at 65 baht each, totaling approximately 2.247 billion baht in December 2023, making BTS a major shareholder with over 20% stakes. However, fierce competition in the parcel delivery business and declining user numbers caused KEX to incur losses, dragging down BTS's performance. Ultimately, BTS decided to sell its KEX shares.
Reviewing KEX's financial performance: in 2020, it had a revenue of 18.917 billion baht and a profit of 1.405 billion baht. In 2021, the revenue was 18.972 billion baht with a profit of 46 million baht. In 2022, revenue was 17.145 billion baht with a loss of 2.829 billion baht. In 2023, revenue was 11.541 billion baht with a loss of 3.880 billion baht.
For BTS, in 2020, the revenue was 34.947 billion baht with a profit of 8.161 billion baht. In 2021, the revenue was 34.716 billion baht with a profit of 4.576 billion baht. In 2022, the revenue was 25.763 billion baht with a profit of 3.825 billion baht. In 2023, the revenue was 18.018 billion baht with a profit of 1.836 billion baht. The most recent fiscal year 2023/2024 (April 2023 - March 2024) showed a severe loss of 5.241 billion baht, largely due to KEX's almost 4 billion baht loss.
BTS Group Holdings Public Company Limited (BTS) reported a total revenue of 24.387 billion baht for the fiscal year 2023/2024, a 1.0% increase or 248 million baht from the previous year.
The revenue increase came from higher interest income of 1.094 billion baht and a 726 million baht increase in service and sales revenue, supported by advertising media business growth and fare revenue from the Yellow and Pink Line electric trains. However, this was offset by a 904 million baht decrease in construction service revenue from the Yellow and Pink Lines after they commenced commercial service.
Total expenses increased by 24.7% or 4.333 billion baht from the previous year, amounting to 21.843 billion baht. This was mainly due to a one-time impairment and disposal loss on investments in KEX totaling 4.363 billion baht.
BTS Group recorded recurring EBITDA of 8.138 billion baht, a 6.1% increase or 469 million baht from the previous year, primarily from higher interest income from the electric train project and profit sharing from investments in the BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF).
However, these gains were offset by increased selling and administrative expenses from business expansions in Super Turtle Public Company Limited (TURTLE) and Rabbit Cash Company Limited (RCash), and increased loss sharing from investments in associates (including KEX and JMART), and increased operating losses in Rabbit Holdings Public Company Limited.
BTS reported a net loss attributable to shareholders of 5.241 billion baht, primarily due to (1) one-time impairment and disposal loss on KEX investments, (2) increased loss sharing from investments in Rabbit Holdings and KEX, and (3) increased financial costs.
In summary, BTS's strategy of investing profits from its electric train operations into various businesses has resulted in significant losses. This has led investors to describe Keeree Kanjanapas, the chairman and major shareholder of BTS, as successful only in the electric train business.
However, even the electric train business isn't performing consistently well. The Green Line is doing relatively fine, but the Yellow and Pink Lines are struggling with lower-than-expected passenger numbers and frequent safety issues.
TISCO Securities analyzed that BTS Group Holdings (BTS) stock prices fell by 18% after the weak performance announcement on May 31, 2024, amid concerns about raising capital. Key risk factors for BTS include lower-than-expected passenger numbers on the Yellow and Pink Lines, higher-than-anticipated service costs, and a sluggish economy.
Losses from the Yellow and Pink Lines will continue to weigh on BTS's profits, although the worst may be over as the 2023/2024 financial report shows no major impairment charges like the previous year. Increased revenue from train operations, profit sharing from BTSGIF, and no further losses from KEX are expected. Loss sharing from Rabbit Holdings and JMART is also likely to decrease.
However, TISCO expects profits to remain weak due to the Yellow and Pink Lines' financing costs, estimated at 1.6 billion baht per year, which will take about 3-4 years to reach breakeven.
The Yellow and Pink Lines, while improving travel convenience, have faced repeated accidents.
On December 24, 2023, early in the morning, the power rail of the Pink Line operated by Northern Bangkok Monorail Company Limited (NBM) of the BTS Group fell to the ground over several kilometers, damaging power poles and several cars, leading to the temporary closure of 7 stations.
A week later, a tire from the Yellow Line operated by Eastern Bangkok Monorail Company Limited (EBM) fell, damaging a car on Thepharak Road but causing no injuries.
On March 28, another incident occurred with the Yellow Line when the electric rail fell over a 5-station stretch from Khlong Tan to Suan Luang Rama IX, damaging 12 cars and injuring 2 motorcyclists.
The Mass Rapid Transit Authority of Thailand (MRTA) reported that EBM is addressing the issues by installing new finger plates, replacing problematic bolts, and inspecting 40,000 bolts. They are also installing heat sensors to prevent future material falls, with the Yellow Line expected to resume normal operations on June 10, 2024.
The Pink Line extension in Muang Thong Thani also had safety issues, with a concrete spill damaging a car on March 30, 2024. The MRTA has imposed stricter safety measures and penalties for future incidents.
Repeated accidents have forced BTS to spend heavily on repairs, reduce fares to appease passengers, and face fines, impacting company revenues.
KGI Securities (Thailand) highlights three critical issues for BTS:
1. The Green Line extension concession expiring in 2029 without renewal, potentially causing significant downside risk.
2. Lower-than-expected passenger numbers on the Pink and Yellow Lines, currently at 50,000 and 35,000 daily passengers respectively, versus an expected 100,000.
3. Investment risks from other ventures like SINGER, JMART, and RABBIT, expected to continue dragging down overall performance.
Even BTS's partner Sino-Thai Engineering and Construction Public Company Limited (STEC) faces its first loss in six years, attributed to the Yellow Line's lower passenger numbers.
BTS will propose at the 2024 annual shareholders' meeting on July 25, 2024, to transfer 3.283 billion baht from legal reserves to offset accumulated losses, leaving 178 million baht in legal reserves. They also plan to issue 650 million new shares as private placement.
Investors now view BTS as struggling beyond its once-successful electric train business, questioning how long it will take to recover.
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