A Quiet Trading Day for BEM amid “BUY” Signals Flying All Over the Market

It appears that the news that should be a positive factor to Bangkok Expressway and Metro Public Company Limited (BEM) came out at the wrong time, causing BEM’s share price to remain flat on February 19, 2020, at ฿11.00/share.

 

A day earlier, the Thai cabinet approved the renewal of the expressway concession for BEM for 15 years and 8 months in exchange of ending a total of 17 disputes between Expressway Authority of Thailand (EXAT) and BEM with a value of lawsuit worth 58,873 million baht.

The outlook on BEM’s share price could have been much better if it was not for the concern over economic slowdown from coronavirus which had caused a global plummet this month.

The Stock Exchange of Thailand closed the morning session higher by 3 points, but a selloff in the afternoon session pressured the market to close lower by 8 points.

Despite negative sentiment from coronavirus, “BUY” recommendations on BEM were given by many analysts.

 

Maybank Kim Eng had an optimistic on the extended concession in which the extension not only limit the long-term downside risks to BEM’s earnings for 15.8 years, but will have an impact to its profit in this year as well for no amortization of related expressways.

Moreover, this new concession does not require more CAPEX for the new Double Deck Expressway (31 billion baht of investment). As a result, BEM will not have any additional financial burdens, enabling it to be well prepared to bid for the Orange Line this year.

Maybank maintained “BUY” recommendation on BEM with an upgraded target price from ฿12.00/share to ฿13.00/share based on SOTP-DCF.

 

KTB Securities (Thailand) (KTBST) stated that the extension eased concern as BEM’s existing concession contract is due on February 29, 2020. Meanwhile, the move should provide positive sentiment in which BEM’s share price is likely to advance further in the short term.

KTBST expected BEM’s 2019E core profit to grow 6.6% YoY to 3.4 billion baht, thus, maintained the “BUY” recommendation as well as the target price at ฿12.10/share, assuming WACC of 5% and terminal growth of 1.5%. Moreover, KTBST believed an opening of four stations to the Blue Line, from Taopoon to Sirinthorn in December, will bode well for BEM’s earnings growth.

 

Trinity Securities maintained “BUY” recommendation with a target price at ฿11.40/share. Trinity asserted that it had slight positive view on the extension while expected BEM’s 4Q19 profit to reach its all-time high at 4.2 billion baht (+6% YoY, +4% QoQ), supporting by the opening of Phase 2 of Metro Blue Line that could increase the number of passengers and train fare around 21% and 6%, respectively, while the cost remained the stable.

 

At least there is still some upside to play……