TRIS Rating reported that BTSC was acquired by BTS Group Holdings PLC (BTSG) in May 2010. As of December 2011, BTSG held a 96.4% stake in BTSC. BTSC is considered a core business of BTSG and has been the key cash flow and profit contributor for BTSG. Therefore, the credit profile of BTSC and BTSG (rated “A” by TRIS Rating) are tightly linked.
TRIS Rating said, BTSC, which was established in 1992, is the first company to operate a mass rapid transit system in Thailand. BTSC was awarded a 30-year concession by the BMA to build and operate the Bangkok Mass Transit System (BTS) with a distance of 23.5 kilometers (km.). The company was also awarded the contracts from the Krungthep Thanakom Co., Ltd., (a wholly-owned subsidiary of BMA) to operate route extensions on the Silom line and the Sukhumvit line. Under the terms of the concession, the company has the right to collect fares and undertake all commercial activities on the system (except the extension routes), including sale of advertising space and leasing commercial space. VGI Global Media Co.,Ltd., a subsidiary of BTSC, is responsible for the media segment. VGI also expanded to offer its services to the modern retail trade channel and hypermarkets.
The BTS, an elevated heavy rail system, commenced commercial operations on 5 December 1999. The rail system consists of two separate lines, the Silom line and the Sukhumvit line which run through the Silom, Sathorn, and Sukhumvit areas. The two lines connect at the Central station (Siam Square). Since inception, BTSC has faced financial difficulties due to the cost overruns and much-lower-than expected ridership. Excluding the financing costs, BTSC reported its first operating profit in fiscal year 2003 when ridership reached 100 million trips. In the first nine months of fiscal year 2012, total ridership was 128,009,656 trips, equal to a 20.93% year-on-year (y-o-y) growth. Average daily ridership was 463,808 trips. The growth in ridership was partly due to the opening of the Sukhumvit line extension on 12 August 2011. On the existing routes, ridership has grown along with economic growth, although ridership was occasionally affected by event risks such as floods and political unrests in Bangkok. TRIS Rating believes that BTS ridership will continue to grow, due to the expansion of the mass transit network, the development of more residential and commercial property projects along the BTS routes, heavy traffic congestion, and a growing Thai economy.
BTSC’s financial strength is underpinned by reliable operating cash flows, sufficient liquidity, and a healthy capital structure. The operating margin has held steady at 58% since 2007. The capital structure benefited from a financial restructuring in 2008. The debt load is now at a manageable level with an affordable financing cost. BTSC’s financial profile was relatively stable during 2010-2011 and slightly improved in 2012. The company generated approximately Bt2 billion in funds from operations (FFOs) during 2010-2011. FFOs rose to Bt2,615 million in the first nine months of fiscal year 2012. As a result, the FFOs to total debt ratio improved from 15% in fiscal year 2011 to 20% (non-annualized) for the first nine months of fiscal year 2012. The earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage ratio was acceptable, ranging from 3.8 times to 5.3 times during 2010-2011. The total debt to capitalization ratio remained fairly stable at 26.27% at the end of December 2011, compared with 26.44% as of March 2011. BTSC’s leverage has been stable at Bt12-Bt13 billion since 2010. TRIS Rating does not expect the leverage to be much lower in the medium term as the company needs to invest Bt1,000 to Bt1,400 million in capital expenditures each year during fiscal year 2013-2014. The expenditures are for purchasing new trains and expanding the media business. In addition, TRIS Rating views that BTSC will continue its high dividend payout ratio to support BTSG’s working capital and debt service needs, said TRIS Rating.
Bangkok Mass Transit System PLC (BTSC)
Company Rating: Affirmed at A
Issue Ratings:
BTS128A: Bt2,500 million senior debentures due 2012 Affirmed at A
BTS138A: Bt2,500 million senior debentures due 2013 Affirmed at A
BTS148A: Bt4,000 million senior debentures due 2014 Affirmed at A
BTS158A: Bt1,500 million senior debentures due 2015 Affirmed at A
BTS168A: Bt1,500 million senior debentures due 2016 Affirmed at A
Rating Outlook: Stable