4QFY16 net profit sees drastic drop on allowance for diminution in value of investment,core profit down 35.9% y‐y.

　　BTS’s 4QFY16 net profit dropped 93.6% y‐y to Bt44mn as the company recorded Bt497mnlosses on allowance for diminution in value of investment. Stripping out this item, core profitfell 35.9% to Bt532mn. Revenue from sales and services rose 25.1% y‐y to Bt1,255mn as: 1)revenue from real estate business declined 92.7% along with lower revenue recognitionfrom Abstracts Phaholyothin Park; and 2) services revenue climbed on a 48.9% rise inrevenue from BTS commercial area, and 4.3% and 7.5% growth in BTS O&M and otherservices amid a 24% decrease in ad revenue (in tandem with VGI) and a change inaccounting in Eastin Grand Sathorn hotel. Other revenue dropped 43%. As for expense,operating cost rose 6.8% and other expense increased due to allowance for diminution invalue of investment. Profit contribution from associates and JVs dropped 49.2% as BTSabsorbed losses from its JVs with SIRI and GLAND, apart from lower profits from BTSGIF.

　　For the full‐year basis, net profit grew 40.7% to Bt4,141mn but core profit fell 24.6% toBt2,017mn. BTS announced an interim dividend of Bt0.34 (annual DPS of Bt0.68) and thestock will trade ex‐dividend on July 28 and payment to be made on August 16. This is thefinal year BTS has committed to guarantee its dividend payment.

　　No growth story but revenue and core profit likely continue to grow.

　　Despite a lack of growth story to drive earnings growth in 2017, BTS business target willlikely continue to drive its earnings up further. For mass transit operation and managementsegment, BTS has set its growth target for ridership at 5%‐6%, average fare at 1%, and O&Mrevenue at 3%‐4%. As for media business, revenue from VGI has been forecast for 50%growth on consolidation of MACO that VGI is going to make a tender offer‐‐to take placebetween June 3 and July 8—after VGI increased its stake in MACO to 37.42%. For propertybusiness, BTS has forecast revenue of Bt680mn with a Bt60mn property sale from Thana Cityand a Bt620mn from commercial areas of its hotels, sport clubs and others. For its JV withSIRI, equity loss is forecast to decline to roughly Bt100mn (vs Bt271mn losses a year earlier)as the JV would recognize revenue from its first condo project The Line Sukhumvit 70 in late2016 and BTS would record equity loss from Bayswater. Last, a number of Rabbit Cardsubscribers is targeted to increase to 6.5mn from 5.2mn and Rabbit Reward members wouldreach 3mn from 2mn and joint shops/brands to increase to 4,500.

　　New train purchases underway to support extension Green Line; to be signed in near term.

　　On May 23, BTS signed sale agreements to buy 46 brand new trains from Siemens and CRRC,worth a combined Bt10.9bn, to support growing demand and new lines. BTS is expecting toseal the deal with Bangkok Metropolitan Administration for the extension lines (Bearing toSamutprakan and Mo Chit to Sapan Mai to Ku Kot) around the middle of 2016. For Bearingto Samutprakan, BTS plans to operate the first station Samrong in March 2017 and the restwithin late 2019, while Mo Chit to Sapan Mai to Ku Kot would be late 2020. As for projectsbidding, Pink, Yellow and Orange Lines are expected to see development in the second halfof the year, as well as BMA’s projects.

　　‘ACCUMULATE’ rating with target price of Bt10.

　　We raise our FY16 earnings forecast with estimated sales & services revenue of Bt5,920mnand net profit of Bt2,164mn (from Bt2,059mn). We expect BTS to provide an annualdividend of Bt0.14, based on payout ratio at 75%. Our SOTP target price is Bt10, slightlylower from earlier level as we adjust our O&M revenue assumption. We reiterate an‘ACCUMULATE’ rating on BTS.