Tris Rating has affirmed the company rating of BTS Group Holdings Plc (BTS) and its 10-billion-baht of outstanding senior unsecured debentures at A.
The new issue rating replaces the one assigned on Aug 24, following BTS's request to increase the issue size by 10 billion baht. Proceeds from the new debentures will be used to repay existing debt, finance its investments or for working capital.
The ratings reflect the company's strong business profile based on the high predictability of service income from mass transit train operation, stable dividend income received from its 33.33% investment in the BTS Rail Mass Transit Growth Infrastructure Fund, and its entrenched position in the media business.
However, BTS's financial profile will be weighed down by a surge in debt over the next four years as the company must fund several large investments in a number of mass transit projects.
In the first quarter of fiscal year 2019, BTS's revenue (excluding revenues from installation and construction services and train procurement service) increased by 14% year-on-year to 1.63 billion baht because of strong growth from the advertising business.
BTS's operating margin (operating income before depreciation and amortisation as a percentage of revenue) substantially dropped from 31.8% in fiscal year 2018 to 19.7% in the first quarter of fiscal year 2019, mainly thanks to an increase in non-recurring sales and administrative expenses.
Meanwhile, BTS's debt-to-capitalisation ratio stood at 50% during fiscal year 2018 to the first quarter of fiscal year 2019.
The stable outlook reflects the expectation the company will achieve steady growth in revenues and cash flow from operations.
Total debt is expected to rise substantially because of the new mass transit projects planned through its subsidiaries. However, net cash flow from existing businesses is also expected to rise substantially.
As a result, the debt-to-earnings before interest, tax, depreciation, and amortisation (ebitda) ratio will remain acceptable, said Tris.
Under Tris Rating's base case scenario, BTS's revenues will gradually increase to around 11 billion baht in 2021.
During 2019-2021, it forecasts the company will recognise revenue of 80 billion baht from electrical and mechanical services, train procurement services, and revenue from the development of the Pink and Yellow lines.
The operating margin is expected to stay around 30%.
The debt-to-capitalisation ratio is expected to dip to 40% in fiscal year 2021, while the ebitda interest coverage ratio should stay above 2.5 times.