Mass Transit Industry - Electric Train Ridership Grows and Development Plan is Clear

Electric Train Routes in Bangkok in 2016

As the capital of Thailand and a popular destination for tourists, Bangkok is encountering a great demand for fast and reliable. According to the Department of Land Transport (DLT), the number of registered cars in Bangkok rose to 9.2 million at the end of May 2016, and grew at a compound annual growth rate (CAGR) of 6.3% during 2005-2015. Electric trains are an alternative to avoid road’s traffic congestion, making the electric train network the most convenient means to travel throughout the city.

Currently, there are five electric train routes serving Bangkok: the Sukumvit Line, the Silom Line, the Chaloem Ratchamongkhon Line (Blue Line), the Airport Rail Link, and the Chalong Ratchadham Line (Purple Line). The Purple Line is the newest route, open for service on 6 August 2016. However, the number of passengers taking the Purple Line is much lower than expected because of a difficulty in connecting to the Blue Line. As of 2016, there are another five routes under construction: two extensions of the Sukumvit Line, two extensions of the Blue Line, and the Red Line.

Electric Train Ridership Increases Steadily

In 2015, electric train ridership reached 344 million trips. While ridership in Bangkok increased at a CAGR of 10.1% over 2010-2015, the CAGR of the Bangkok Mass Transit Authority (BMTA) bus passengers decreased by 3.5% per year. Because there are only a few electric train routes, there is still room for significant growth in ridership.

Thai Government Adds Many New Mass Transit Projects in 2016

In 2016, a number of infrastructure projects were approved by the government, and a few are now under construction. For now four electric train projects were approved within the first nine months of 2016: the Pink Line and the Yellow Line on 29 March 2016, the Orange Line on 19 April 2016, and the Gold Line on 6 September 2016. Construction will begin on all these lines in 2017. All these projects will cost around Bt190 billion.

In 2016, the length of the electric train routes currently in service is 109 km.; another 107 km. is under construction. In 2017, the extension of the Sukumvit Line to Samut Prakan, a length of 13 km., will open and bring the total length to 122 km. Plans for other new routes will bring the length of the route network to 337 km. in total within 2023.

New Electric Train Projects would Raise Leverage of Operators

TRIS Rating rates the two operators of electric trains: BTS Group Holding PLC (BTS) and Bangkok Expressway and Metro PLC (BEM). The business activities of BTS comprise several other businesses in addition to electric train. For example, the mass transit produced around 60% of BTS’s earnings before interest, tax, depreciation and amortization (EBITDA) while the media segment contributed around 40%. BEM has two main lines of business: expressway (90% of EBITDA) and electric train (10% of EBITDA). Both electric train operators have significant businesses other than electric trains, and each firm’s financial status in this report reflects its business as a whole.

BEM has a high operating margin before depreciation and amortization: around 60%. The margin is mainly driven by the high margin of the expressway segment. TRIS Rating forecasts the margin of BEM to stay around 50% through 2018. The operating margin of BTS used to be similar before 2013. In 2013, BTS sold the net farebox revenue to the BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF), an investment fund, and the margin tumbled to 27.9% in April-September 2016. BTS’s operating margin is expected to stay around 30% during 2016-2018.

The two companies have contrast leverages. The debt to capitalization ratio of BEM is around 60%. TRIS Rating expects the ratio to increase due to future electric train investment. There is a possibility that the ratio would rise to 65%-70%. Therefore, BEM needs to monitor the ratio carefully in order to maintain the current rating. Once BTS sold the net farebox revenue to BTSGIF in 2013, BTS used the proceeds to repay debt. Since then the debt to capitalization ratio of BTS has been under 20%. However, the ratio slightly increased to 24.5% as of September 2016. TRIS Rating expects an increase in the debt to capitalization ratio of BTS, the ratio is forecast to rise to 30%-35% since BTS plans to further invest in mass transit projects and other businesses.

Industry Outlook: Stable

TRIS Rating holds the view that there is a significant upside for the future of electric trains in Bangkok because a fully linked network would dramatically change transportation in and around the city. However, the completeion of the network will take years to develop. The number of passengers will also depend on the fare level. Right now, most traffic is in the center of Bangkok. The new routes that pass the city centre are expected to achieve their performance goals much easier than the routes out of the city centre. The new routes out of the city centre might need more time to build up a sizeable base of passengers.

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