The “stable” outlook reflects TRIS Rating’s expectation that BECL will continue to deliver strong operating performance and reliable cash flows. The company is expected to employ cautious financial policies during the investment period so as to maintain its credit quality. BECL's credit upside is limited, given its current investment plans. The credit downside case will be triggered by any aggressive debt-funded investment.
BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System -- SES) and the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as Sector C+. Both expressways were established under 30-year Build-Transfer-Operate (BTO) concessions awarded by the Expressway Authority of Thailand (EXAT). The SES, the extension of the SES (Sector D), and the Sector C+ concessions will expire in 2020, 2027, and 2026, respectively. The SES is linked to the Chalerm Mahanakorn Expressway (the First Stage Expressway System -- FES), which was constructed and has been operated by the EXAT. The connection of FES and SES expressways creates a comprehensive network which provides an alternative to the heavily congested free roads within central Bangkok and for the route travelling north. BECL shares toll revenues with EXAT on the FES and SES Sector A and B. From March 2011 until the end of the concession, the revenue sharing ratio was 40% for BECL and 60% for EXAT. The toll revenues from the suburban network, consisting of Sector C, D, and C+, are not required to be shared with EXAT. In addition, BECL was awarded the concession for the Si Rat-Outer Bangkok Ring Road Expressway (SOE). The concession is a BTO concession, covering 30 years, including a construction period of up to 48 months. The total project cost is Bt25,491 million. The construction began on 15 December 2012 and is scheduled to be completed in December 2016. The SOE project is progressing as planned. BECL will receive 100% of the tolls it collects.
BECL’s solid business profile is supported by the proven track record in traffic volume on its network. During the past five years, the average daily traffic volume grew by an average of 3% per year. In 2014, the traffic volume barely rose, due mainly the political situation and the current economic slowdown. The average daily traffic volume was 1.104 million trips per day in 2014, compared with 1.100 million trips per day in 2013. However, toll rate adjustment in late 2013 drove the average daily toll revenue up by 5.6% year-on-year (y-o-y) in 2014 to Bt23.3 million per day. For the first five months of 2015, after the political situation stabilized and fuel prices dropped, BECL reported a 5.6% y-o-y increase in the average daily traffic volume to 1.130 million trips per day. The average daily toll revenue went up by 6.1% to Bt23.9 million per day in the same period.
BECL’s financial strength is average. Its strong profitability is weighed by high financial leverage, reflecting the capital intensive nature of expressway business. In 2014, BECL reported toll revenue of Bt8,485 million, 5.5% rise compared with a year earlier. For the first quarter of 2015, toll revenue increased by 7.4% y-o-y to Bt2,196 million, reflecting the growth in traffic volume on all of BECL's routes. Profitability, measured by operating income before depreciation and amortization as a percent of sales, has stayed healthy, ranging between 78%-80% during the past five years. Leverage has softened, mirroring its debt financing needs for the SOE project. At the end of March 2015, BECL's total debt was Bt30,513 million. The ratio of debt to capitalization was 57.9%. Thanks to its strong profitability, BECL's liquidity is fair. For the first quarter of 2015, the funds from operations (FFO) to total debt ratio was 20% (annualized, from the trailing 12 months) while the earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage ratio stayed at 11.3 times.
Going forward, TRIS Rating believes that toll road usage will continue to grow moderately in the medium term, supported by ongoing urban sprawl and increases in the number of cars registered in Bangkok and the vicinity. Under TRIS Rating’s base case scenario, during 2015-2017, toll revenue is expected to grow by 3%-5% annually on BECL's existing network. The opening of the SOE project at the end of 2016 will add growth to BECL's revenue. However, profits on the SOE segment are not expected to be significant at the beginning as it will need time to build up traffic volume. With its steady and reliable operating cash flows, BECL is expected to generate FFO of at least Bt6,000 million per annum during 2015-2017. TRIS Rating believes that BECL will be able to meet its financial obligations and capital investment for toll road business.
BECL is in the process of amalgamating with BMCL. In TRIS Rating's view, the new combined company will have a stronger business risk profile, supported by diverse set of high-quality assets, long contractual agreements, and the growth prospects for toll road traffic and mass rapid transit (MRT) ridership. In addition, the new company will be a qualified short list for any future public transportation development projects to be launched by the government. However, the financial profile of the new company, on a consolidated basis, will be relatively softened, taking into account weaker performance of the MRT segment. Nonetheless, both businesses will be able to service their own obligations. The financial profile of the new company can support the financing needs for the SOE project and the MRT Purple Line project. In return, the operation of toll road and the MRT businesses, when combined, will smooth the new company's performance as the SES concessions (Sector A, B, and C) will expire and will be subject to renewal. The rating of the new company will be subject to the strategy promulgated by the combined entity and the structure of the new company. Concerning matters related to the amalgamation is consents from the relevant authorities and creditors. For the creditors, BECL has confirmed refinancing facilities to handle any debt redemption needs.
Bangkok Expressway PLC (BECL)
Company Rating: A
Issue Ratings:
BECL163A: Bt2,000 million senior unsecured debentures due 2016 A
BECL163B: Bt1,000 million senior unsecured debentures due 2016 A
BECL16OA: Bt2,000 million senior unsecured debentures due 2016 A
BECL172A: Bt3,000 million senior unsecured debentures due 2017 A
BECL183A: Bt2,000 million senior unsecured debentures due 2018 A
BECL18NA: Bt1,000 million senior unsecured debentures due 2018 A
BECL192A: Bt1,000 million senior unsecured debentures due 2019 A
BECL203A: Bt1,000 million senior unsecured debentures due 2020 A
BECL214A: Bt1,000 million senior unsecured debentures due 2021 A
Rating Outlook: Stable