Krungsri Securities (KSS) sees a positive outlook for BTS Group Holdings Public Company Limited (SET: BTS) after the Central Administrative Court (CAC) ruled that the Bangkok Metropolitan Administration (BMA) must pay THB 11 billion in overdue operations and maintenance (O&M) fees.
The verdict concerns contract payments related to the company’s operation and maintenance of the first and second extensions of the BTS Green Line between June 2021 and October 2022. The court has mandated that BMA, including accrued interest, settle the amount within 180 days of the decision.
BTS’ cash flow position is expected to improve significantly once BMA fulfills its payment obligation. The O&M payment had been delayed pending the CAC’s decision, which now leaves BMA with limited grounds to postpone compensation further. While BMA technically has the option to appeal to the Supreme Administrative Court, indications suggest it is unlikely to do so in order to avoid accumulating additional interest expenses.
The O&M liabilities between BMA and BTS are extensive, with three major categories outstanding. The first involves the THB 11 billion ruled by the court for services from June 2021 to October 2022. The second pertains to around THB 20 billion for services provided from November 2022 to December 2024.
The third relates to ongoing O&M fees, amounting to approximately THB 1.8 billion per quarter, or THB 7.2 billion annually. With the latest court ruling and previous legal losses, BMA now appears ready to address all outstanding payments to BTS to mitigate further interest liabilities.
Krungsri notes that these repayments will bolster BTS’ balance sheet. The anticipated cash inflow of THB 32 billion for past O&M services could be directed toward debt reduction, which would bring down the company’s net debt from about THB 153 billion as of 1QFY26 to a lower net debt-to-equity ratio, potentially falling to 2.1x from 2.7x. Enhanced cash flow is also expected to reduce the company’s reliance on additional financing for current Green Line operations.
From a profit and loss perspective, the immediate impact will be limited. While interest expenses should decline as debt levels fall, this will likely be offset by a reduction in interest income previously booked on the O&M liability.
KSS maintains its ‘Buy’ call on BTS, with a sum-of-the-parts-based target price of THB 6.49 per share. The analyst highlights the stock’s cheap valuation and potential turnaround, with near-term improvements seen in cash flow from BMA repayments, though a full earnings recovery could be delayed given recent softer performances from affiliates VGI and Rabbit.
