Analysts Recommend “BUY” Stocks in Transport Sector on Rising Traffic, Optimism Earnings Outlook

Krungsri Capital Securities believes that the land transport sector is transitioning from a recovery phase to a development phase as a result of the rapid expansion of Thailand’s public transportation system, particularly ridership of mass transit.

According to a research released by Krungsri Capital Securities on Tuesday, the brokerage firm has a positive outlook on the transportation sector, with Bangkok Expressway and Metro Pcl. (SET: BEM) being chosen as the top pick stock.

Both BEM (Target Price: THB11.5) and BTS Group Holdings Pcl. (SET: BTS) have BUY ratings. But given lingering regulatory risks and based on projected earnings, BEM is a safer bet than BTS, said Krungsri Capital. Since BEM did not get the Orange Line contract, the brokerage has lowered its price target by THB1.0 (or 10%), though the company’s earnings are expected to grow. In contrast, regulatory risk and lackluster operations at its subsidiary VGI will continue to affect BTS’ profitability.

Since most schools take a break in April and May, toll road traffic and public transit rail ridership tend to be lower than usual in the second quarter. This would typically result in lower quarterly earnings for BEM and BTS. However, in 2Q this year, BEM is expected to buck the trend thanks to dividend income from its stakes in TTW (18.47%) and CKP (16.82%).