BTS divests 15 per cent in VGI as the outlook for the advert firm starts to show signs of improvement

BTS Group Holdings Plc BTS, on Friday, reportedly sold a big-lot transaction of its holding in VGI Plc’s. The transaction was at 1.3 billion shares worth 7.8 billion baht with the proceeds being used to invest in U-tapao and the Eastern Economic Corridor (ECC).

The big-lot selling of VGI shares, which was traded at 6 baht per share, represents an 11 per cent of discount to the closing price. 

According to local media, BTS as a VGI’s major shareholder will use the fund to invest in infrastructure in U-Tapao airport and the Eastern Economic Corridor (ECC).

As a result, the big-lot transaction would represent 15 per cent of BTS’ total holdings in VGI and bring BTS’ holdings down to 51 per cent from the previous 66 per cent.

VGI’s quarterly earnings

VGI reported a net profit of 12 million baht for the quarter ending September 2020, a sharp turnaround from a loss of 104 million baht that the firm had reported during the first quarter of the year.

VGI’s fiscal year starts in March of each year therefore the quarter ending September is its 2nd quarter.

The fortunes of the company had turned around from recent years due the the pandemic. Just last year the company was racking in profits.

During the 6-months of 2020, the company recorded a net loss of 92 million baht, the outbreak of the pandemic has taken a toll on the company’s earnings as advertising revenues of companies have dried up.

Phatipak Navawatana, an analyst at Krungsri Securities said in a note to clients that in a conference call with analysts the company said that the overall tone was positive.

He said that the key takeaways were as follows:

1) Revenue momentum would continue to grow in Q3 2020 driven by improving economic conditions and seasonal effects

2) The 30 million baht legal fees for the Midas case booked in Q2 2020 would not recur. Hence, they expect SG&A expenses to drop quarter on quarter (QoQ).

3) Overseas operations would remain weak in Q3 2020 due to the Covid-19 impact

4) The Kerry (KETH) IPO would dilute VGI’s stake from 23 per cent to 19 per cent, but they will recognize associate income from KETH because they have one board seat out of a total of nine.

This comes despite the not so good numbers reported for Q2 2020 when the firm saw its revenues drop 31 per cent year-on-year (YoY). The YoY drop is expected as the Covid-19 pandemic continues to affect the economy and VGI’s revenue.

Phatipak said that the strong revenue growth QoQ – led by the out of home segment – is encouraging. Gross margin surged to 40 per cent from 25 per cent in Q1 2020, due to the strong jump in revenue.

Associate contribution remains weak at 53 million baht loss vs 28 million baht profit in Q2 2019 and 22 million baht loss in Q1 2020, as MACO’s overseas business was hit hard by the pandemic.

Krungsri continues to have a ‘buy’ rating on the shares with a 12-month target price of 8.60 baht a share.

As of 16.15 p.m. on Friday, VGI shares traded at 6.80 baht per share, up 0.74 per cent, with a transaction value of 5,435.2 million baht.

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