BTS Group accelerates into inexorable growth era
BTS Group has already secured contracts, which will increase its mass transit track length under operation from 38km to 132km by 2022, with more set to come
Country Business Reports interviews and articles by Discovery Reports www.discoveryreports.com
There is rush hour city traffic, and then there is Bangkok traffic. With an area of 1,500 square kilometres, an estimated 11 million inhabitants, nine million registered vehicles and a constantly growing number of tourists, traffic in this vibrant concrete jungle is notorious any time of the day. Opportunely, the Thai government and BTS Group are responding fast.
BTS Group has already secured contracts, which will increase its mass transit track length under operation from 38km to 132km by 2022, with more set to come. A mere subset of the network expansion that is expected to be completed in 2037, the public transport will take rail market share from a modest 6 per cent to 24 per cent.
“It is not often that a city sees such rapid development of its urban rail network, and BTS Group is primed to benefit,” says Kavin Kanjanapas, executive director and CEO. “Our aim is simple: responsibly improve people’s quality of life by expanding our mass transit network and community development platforms to generate strong shareholder returns in the process.”
While most of the world’s urban development over the past 50 years has been road-related, mass transit via rail has been making a comeback, thanks to successful private initiatives such as those implemented by BTS Group. The conglomerate, which is 41 per cent owned by Keeree Kanjanapas, is a leading provider of passenger services in Thailand, focusing on mass transit solutions in Bangkok. It is now broadening its scope to include media management, property development and support services.
“Our system, which uses 100 per cent private investments, is the only scheme that was successful in this sector,” Kavin says. “With our corporate structure, decision-making is quick, and we are able to create a successful synergy across the mass transit, advertising, property and services businesses.”
Listed on the Stock Exchange of Thailand and among the country’s 50 largest companies in terms of market capitalisation, BTS Group oversees four business divisions that have been working symbiotically for two decades. Its flagship mass transit rail project, the BTS SkyTrain, is Thailand’s first metro transit system.
“The BTS SkyTrain has enhanced the country’s international image and has dramatically changed the model for real estate development along Bangkok’s mass transit lines,” Kavin says. BTS SkyTrain services more than 780,000 riders on a weekday, and with the opening of two new lines in the midterm, BTS SkyTrain expects to accommodate up to 2 million passengers each day, in turn driving an expected 25 per cent annual net profit growth in the next five years.
Following the surge of advertising and retail opportunities unlocked within the various BTS stations and trains, BTS Group established the media management company VGI Global Media. The majority-owned subsidiary enjoys an exclusive concession to manage advertising space on core BTS networks. It has grown to become Thailand’s largest out-of-home media company with media inventory spanning key offices and commercial buildings in Bangkok and digital and static billboards across airports and roadsides in Thailand.
Strategically upholding BTS Group’s various outfits, the services business division creates platforms that provide value-added benefits to the company’s core focuses. These include the development of a common mass transit network ticketing system, e-money payment services, construction and hotel management services, and sports club management. Through key alliances with other private companies and public-private partnerships (PPP), BTS Group is committed to promoting sustainable city living and contributing to the country’s social development.
“Governments constantly seek private investments or PPPs to build durable and sustainable infrastructure,” Kavin says. “They need partners who know how to run the business efficiently and profitably, and when it comes to integrated mass transit solutions, BTS Group’s expertise is unrivalled. We concentrate on the integration of mass transit, media, data and payment alongside the property.”
BTS Group also has the balance sheet to match. As of December last year, BTS Group’s balance sheet boasted 34 billion Thai baht (HK$8.4 billion) in cash and liquid investments, and net debt to equity stood at only 0.34.
Apart from administering mass transit concessions and its flourishing media business, BTS Group applies its real estate expertise by developing land along existing and future mass transit lines. With property development experience that dates back to 1968, BTS Group partners with leading real estate players to strategically bolster its portfolio. “We will acquire more assets, raise capital funds to expand our property business,” Kavin says. “We are always looking for opportunity, and locally, we actively engage in the market to get new contracts.”
BTS Group’s listed vehicle for its property development business is U City, which has 11 billion baht of investments in its development pipeline. Out of the total amount, 6 billion baht will be used to construct a seminal, mixed-use building adjacent to the BTS and Airport Rail Link stations in Phyathai. The building will feature 400 hotel rooms, more than 100 premium residence units and around 20,000 square metres of office space. In addition, 3 billion baht will be used to build an international school at Thana City that can accommodate up to 1,800 students. Finally, 2 billion baht is earmarked to refurbish the Old Customs House along Charoen Krung Road into a hotel. In May 2017, U City acquired Vienna House, a European hotel group with 27 owned and leased hotels together with a management platform to bolster its recurring income and geographically diversify its earnings base.
Some investors question whether BTS Group is doing too much, too far and too wide, but Kavin disagrees. “The focus is clear. Over the next five years, BTS Group’s capital investment is forecast at 127 billion baht, of which 123 billion baht is allocated for mass transit. Mass transit is at our core and always will be, but we will also capitalise on the benefit that our media and property businesses can derive from this, and transform some of the profits into hard assets,” Kavin says. “Through U City, we will continue to partner or acquire properties through mergers and acquisitions to grow the company.” Another similarly successful collaboration is the company’s joint venture with Sansiri, a leading property developer known for its high-quality detached houses and condominiums. BTS Group and Sansiri jointly developed condominiums located next to mass transit systems. The strategic alliance was launched in 2015, and is on track to cumulatively launch 100 billion baht worth of projects by 2022.
“We only partner with the best of the best,” Kavin says. “Our joint venture partners are happy with our work because we are fair and professional. Together, we’ll forge ahead to provide smart urban solutions.”