Free expressway cuts 10% from BECL's profit

The company's net profit fell 10 per cent in the period, which is much worse than brokerages' previously estimated drop of about 6 per cent.

BECL managing director Payao Marittanaporn said last week that toll revenue in the quarter amounted to Bt1.75 billion, down Bt60 million year on year because of the opening of the Bang Phli-Suksawad Expressway (Southern Outer Bangkok Ring Road), which is toll-free for the first year.

However, interest expenses decreased as a result of debt repayment. BECL also reduced its costs by issuing debentures during the past year, she said.

Kim Eng Securities said BECL's net profit dropped by 10 per cent compared with a year earlier, with operating and administration expenses having increased in line with expectations. It said the company had been affected by the opening of the Bang Phli-Suksawad Expressway, causing its toll revenue to decrease by 13 per cent year on year to Bt1.75 billion.

Kim Eng has revised down its forecast for the company's net profit this year to Bt1.44 billion. BECL earned Bt1.4 billion in 2006.

The securities house believes BECL has now absorbed the effects of the Bang Phli-Suksawad Expressway's opening. It expects that the company will be allowed by the government to increase its toll fees this year, or to receive compensation from freezing them at the current level.

These factors have led Kim Eng to recommend that investors buy the stock, with a target price of Bt26.60.

Ayudhya Securities also recommends a "buy" on BECL stock, with a fair price of Bt26.

However, the brokerage said the price range of Bt4 to Bt4.50 for Thai Tap Water's initial public offering would drive BECL's fair price to Bt26.50 to Bt26.70. BECL has a stake in the water company.

It said the volume of vehicles using the BECL's expressways had declined by 4 per cent year on year following the opening of the Southern Outer Bangkok Ring Road, which is owned by the Expressway and Rapid Transit Authority of Thailand.

However, Ayudhya Securities believes BECL's net profit will soar in the final quarter because of an increase in expressway fees scheduled for September.

The increase is expected to be up to Bt5 per vehicle on average.