Contacts E-mail Addresses Monthip Pringuthumporn [email protected] N e w s f o r I n v e s t o r s Yingyong Chiaravutthi,CFA [email protected] Nopalak Rakthum [email protected] Announcement No. 639 17 July 2009 Suchada Pantu [email protected]

Bangkok Mass Transit System Public Company Limited Company Rating: A Issue Rating: Up to Bt12,000 million senior debentures due within 2016 A Rating Outlook: Stable

Rating Rationale TRIS Rating assigns the company rating of Mass Transit System PLC (BTSC) and the rating of BTSC’s issue of up to Bt12,000 million in senior debentures at “A”. The proceeds from the debentures will be used to repay existing debts. The ratings are based on the assumption that the company will not exercise the call option on the convertible debentures before the issuance of the new debentures. The ratings reflect a proven record of system ridership, stable operating cash flow, the benefits from being a mass transit system located in downtown Bangkok, potential ridership growth, and a strong balance sheet after the business rehabilitation. These strengths are partially offset by a single network, large capital expenditures needed over the next four years, increased business risk profile as BTSC begins to invest in property development through its subsidiaries, and political risk which most concessionaires face. In addition, debenture holders should be aware that there is no negative pledge under the terms and conditions governing the rights and obligations of the company and the debenture holders. Though all of BTSC’s assets are currently free of encumbrances, the company may provide collateral to any creditor in the future. If this occurs, the rating of the debentures may be notched down from the company rating. BTSC, which was established in 1992, is the operator of the only privately-financed mass system in . BTSC was awarded a 30-year concession by the Bangkok Metropolitan Administration (BMA) to build and operate the Bangkok Mass Transit System (BTS). The BTS, an elevated heavy rail system, commenced commercial operations on 5 December 1999. The rail system, which runs above three highly congested roads (Silom, Sathorn, and Sukhumvit), serves residential areas, the central business district, and key commercial areas. There are 25 stations along the operating track of 25.7 kilometers (k.m.) with two separate lines, the and the . The two lines connect at the Central station (widely known as Siam Square). The BTS connects with the underground rail system (operated by the Bangkok Metro PLC -- BMCL) at the Asok, and Mo Chit stations. BTS’s competitive advantages are a record of safety, convenience and reliability. BTSC is entitled to receive all revenues on the BTS, including fare box revenue, and commercial rental and advertising revenues at 23 stations (excluding the newly opened Krungthonburi and Wongwienyai stations on the Silom line). On 29 June 2001, BTSC has granted VGI Global Media Co., Ltd. (VGI Global) an exclusive license to market all commercial areas and advertising in the BTS Skytrain. BTSC receives minimum guaranteed revenue or 50% of gross revenue from the use of advertising space and merchandising areas, whichever is greater, while VGI is responsible for all investments and operating expenses. On 13 March 2009, BTSC signed a sale and purchase agreement to buy all VGI Global shares from FN Asia Co., Ltd. for Bt2,500 million. The purchase should be completed in the third quarter of 2009. Apart from the advertising business, BTSC has diversified into property development along mass transit routes through its subsidiaries, Nuvo Line Agency Co., Ltd. (Nuvo Line) and UniHolding Co., Ltd. (UniHolding). Currently, the company has three land plots on hand and two land plots under sale and purchase agreements. All are located near or next to BTS stations. The first property development project will be a four-star hotel located on South Sathorn road, close to the BTS Surasak station. BTSC has faced financial difficulties since commencing operations. Operating performance was lower than expected because ridership was lower than projected. The level of debt increased after the Thai

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baht depreciated in 1997, which resulted in a surge in interest expense. BTS ridership reached a sustainable level in fiscal year 2004 when total ridership reached 100 million trips, four years after opening. In fiscal year 2009, total ridership was 135,939,800 trips, with an average weekday ridership of 429,004 trips. TRIS Rating believes that BTS ridership will grow continuously due to the expansion of the mass transit network, more land development along the BTS route, heavy traffic congestion, and continuous growth of the Thai economy. For the fiscal year ended March 2009, BTSC reported a net profit of Bt21,911 million of which Bt22,447 million was a gain from business rehabilitation. Fare box revenue was Bt3,288 million, an increase of Bt67 million (2.1%) from the previous year as a result of a 2.1% increase in ridership. The operating margin before depreciation and amortization dropped to 52.77%, compared with 54.46% in the previous year. The drop was due to higher professional fees for the new capital issued as part of the business reorganization. After exiting from business rehabilitation in October 2008, BTSC’s capital structure has been relatively strong. As of March 2009, adjusted debt (including future interest of Bt4,895 million but excluding convertible debentures of Bt5,745 million) was Bt14,751 million. The adjusted debt to capitalization ratio was 31.39% and the funds from operations (FFO) to adjusted debt ratio was 10.7%. With planned capital spending for property development projects, TRIS Rating expects that debt levels will not decline in the medium term. Though capital spending is expected to exceed operating cash flow as the property development projects are under construction, the company is expected to maintain the total debt to capitalization ratio below 40%.

Rating Outlook The “stable” outlook is based on the expectation that BTSC will maintain good service on the system to sustain ridership. While TRIS Rating expects BTSC to have substantial capital expenditures on property development projects over the next four years, BTSC’s management intention to maintain the company’s good credit profile as well as the strong operating cash flow from the rail transport business should be able to maintain the capital structure and cash flow protection measures appropriate for the rating category.

Key Rating Considerations concession. The concession started when the Strengths/Opportunities system opened for commercial operations on 5 ƒ Operator of the only rapid transit system in December 1999. downtown Bangkok ƒ Stable operating cash flow from rail Construction: business BTSC awarded the design-build contract to the ƒ Strong balance sheet Siemens-Italian Thai Consortium on 4 July 1995. ƒ Capable and experienced management team Siemens, as the leader of the consortium, was Weaknesses/Threats responsible for the electrical and maintenance works ƒ A single network (E&M), while Italian Thai Development PLC (ITD) ƒ Exposure to political risk was responsible for designing and building the ƒ Large planned capital expenditures infrastructure. As stipulated in the concession, the ƒ Entering into high volatility property develop- system infrastructure was transferred to BMA ment business when construction was complete. The electrical and mechanical equipment will be transferred to the BMA when the concession expires on 4 December Company Overview 2029. BTSC, which was established in 1992, is the operator of the privately-financed mass rapid transit Operation and Maintenance: system in Thailand. The company operates the BTS The BTS, an elevated heavy rail system, under a 30-year design-build-own-operate-transfer commenced commercial operations on 5 December (DBOOT) concession granted by the BMA. Under 1999. BTS has 35 trains. Each computer-controlled the terms of the concession, the company has the train consists of 3 passenger cars and can run in right to collect fares and undertake all commercial either direction from driver cabs located at each end activities on the system, including advertising of the train. BTS operates a 25.7 km route network and leasing space, throughout the term of the with 25 stations. The network comprises two lines: ______Bangkok Mass Transit System PLC 2 17 July 2009

N e w s f o r I n v e s t o r s the Sukhumvit line and the Silom line. The (SCD) held 23.76%. If the remaining convertible Sukhumvit line is 16.5 kms long and runs from Mo debentures convert to equity, the share proportion of Chit station in the north to On Nut station in eastern SRTI will decrease to 52.68% and the proportion of Bangkok. The Silom line, meanwhile, runs 8.5 kms SCD will increase to 39.34%. After the conversion, from the National Stadium to the Wongwienyai Mr. Keeree Kanjanapas, the founder, will indirectly station. The two lines interconnect at the Central hold a 26.86% stake in BTSC through an investment station (Siam Square). Service begins at 6 a.m. and in SRTI. runs until midnight. To ensure the smooth operation, Siemens was Recent Developments obliged, under the Construction and Supplies ƒ Entered into agreements with BMA for the Contract, to provide operation assistant for the first Silom line extension two years. After that BTSC has operated the system On 7 May 2009, Krungthep Thanakom Co., by itself. Siemens was also awarded a contract for Ltd., a wholly-owned subsidiary of BMA, hired the maintenance and provision of spare parts for all company to prepare equipment and tools for the electrical and mechanical systems for five years and operation of Silom line extension. On 12 May was renewed in 2006. The renewed contract will 2009, BTSC signed an operational and maintenance expire in 2014 and is not included the work for the service agreement with Krungthep Thanakom to Automatic Fare Collection System which BTSC has provide operational and maintenance services for been maintained by itself. However, BTSC has the Silom line extension. The agreement took effect developed a maintenance team to learn from its on 15 May 2009 (the date of the commencement of contractor. The company expects to undertake the services) and will expire on 14 September 2011. repair and maintenance activities in the medium BTSC will receive a fixed fee of approximately term. Bt184 million per annum, subject to certain specified adjustments. Finance: The Silom line extension consists of two The company has faced financial difficulties stations covering 2.2 kms from the Thaksin bridge since commencing operations. Operating perfor- station, crossing over the Chaopraya river, to the mance was lower than expected because of lower Wongwienyai station. The extension was con- ridership than forecasted, while debt increased structed and financed by the BMA. substantially after the depreciation of the Thai baht, In an anticipation of increased ridership from which resulted in a surge in interest expense. BTSC the network extension, the company has purchased defaulted on its principal payments in 2002. an additional 12 electric train cars worth US$65 Discussions with creditors on a debt restructuring million from Changchun Railway Vehicles Co., Ltd. plan have started since then, but no tangible (CRC). The first shipment of new trains will arrive progress was made. In 2006, BTSC decided to at the end of 2009. All trains will be received bring the issue to the Bankruptcy Court and filed for within 2010. In addition, the company also changes business rehabilitation on 20 February 2006. The the existing signaling system to enhance the court approved the plan on 31 January 2007. Under performance and the expandability of the system the plan, the company converted Bt16,340 million from a Siemens system to a Bombardier system. of debt to equity at Bt15.8 per share, decreased The cost of the new signaling system is Bt584 paid-up capital by Bt10,943 million to write off million plus EUR16.86 million. The works are retained losses, wrote off Bt19,343 million of expected to be complete in early 2010. accrued interest, and repaid Bt12,966 million in debts with proceeds of Bt14,821 million from new issued share capital (Bt3,178 million) and sale of ƒ Acquired two companies to start property zero coupon convertible debentures (Bt11,643 development million). Debt after the rehabilitation plan was BTSC purchased three pieces of land by Bt10,016 million. BTSC completed the plan and acquiring two companies, Nuvo Line Agency was released from business rehabilitation on 29 Co., Ltd. and UniHolding Co., Ltd., with a total October 2008. As of March 2009, the company acquisition cost of Bt501 million. On 12 March recorded a gain of Bt22,447 million from the 2009, the company signed a sale and purchase business rehabilitation program. agreement to purchase two pieces of land on Nana Under the new capital structure, the ownership and Phyathai roads from Thavee Asset Management stake of the new investors was 87.41% as of Co., Ltd., a subsidiary of Bangkok Bank PLC. The March 2009, of which Siam Rail Transport and purchase price was Bt1,450 million. The company Infrastructure Co., Ltd. (SRTI) held 63.65% and already placed a deposit of Bt500 million on the Siam Capital Developments (Hong Kong) Ltd.

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N e w s f o r I n v e s t o r s signing date; the rest (Bt950 million) will be paid by VGI Global as collateral. Pursuant to the SPA, the 30 December 2009. sale transaction shall be completed by 14 September 2009, but BTSC and FN Asia may agree to Nuvo Line Agency Co., Ltd. (Nuvo Line): postpone the transaction for up to 180 days. VGI Global is an integrated advertising and On 25 December 2008, BTSC acquired all the marketing services company. The company has shares of Nuvo Line from Makha Trading Co., Ltd. three wholly-owned subsidiaries, VGI Advertising (Makha) for Bt1 million in cash and the assumption Media Co., Ltd., 999 Media Co., Ltd., and VGI of outstanding loans of Bt1,984 million. BTSC MultiTech International Co., Ltd. The group has increased the paid-up capital of Nuvo Line to been awarded various concession rights to manage Bt2,000 million and lent Bt180 million to Nuvo and use the advertising space and merchandising Line to repay debts owed to financial institutions. areas of BTS, advertising space and LCD screens in As of March 2009, Nuvo Line still had an TESCO and Lotus Express stores, and advertising outstanding loan owed to its previous shareholder areas in Big C stores. The concession rights from worth Bt22 million at an interest rate of 15% per BTSC and from TESCO with respect to TESCO year. In March 2009, BTSC sold a 20% stake in Super Centers and Lotus Express stores will expire Nuvo Line to Pacific Habor Advisors Pte. Ltd. for in 2014. The rights from Big C stores will expire in US$16 million, equivalent to Bt576 million. BTSC 2015. gained Bt167 million from the sale of this investment. INDUSTRY ANALYSIS Nuvo Line owns a plot of land with four ƒ Background unfinished structural buildings, with an estimated Before BTS began operations in 1999, the mass total usage area of approximately 236,000 square transit system in Bangkok relied entirely on roads, meters (sq.m.). The total area of the plot is 22-2-18 toll-ways, and free motorways, most of which were rai, located on Phaholyothin road near Central aimed at alleviating traffic congestion within and Department Store (Ladprao Branch). In November around the Bangkok area. However, the growth of 2007, the appraisal value, including the land and the the urban population and development concentrated four unfinished structural buildings, as assessed by in the metropolitan areas meant the expressways and Thai Appraisal Lynn Philips Co., Ltd., was Bt2,023 motorways could not keep pace with the number of million. On this site, Nuvo Line plans to develop cars in the city. a medium- to high-end residential condominium According to the Department of Land Transport valued at more than Bt10,000 million. (DLT), there were 5.9 million cars registered in Bangkok in 2008, an increase from 1.7 million cars UniHolding Co., Ltd. (UniHolding): in 1989. However, the number of new registered In May 2009, BTSC acquired all shares of vehicles diminished recently due to economic UniHolding from Makha for Bt500 million and slowdown and declining with consumer confidence. assumed outstanding loans that UniHolding had Electric train systems (both elevated and with financial institutions and Makha worth Bt1,068 underground) are introduced to solve traffic million. congestion. Other benefits include the reduction of UniHolding owns two pieces of land situated air pollution in the city and less dependence on on Surasak road and Phaholyothin road. The expensive petroleum-based fuels. Surasak land has an area of 2-1-57 rai located on BTSC is the first elevated train operator, created South Sathorn road, which can be linked to the BTS under the concept of a private company operating a Surasak station. The land on Phaholyothin road has public service. BTS routes run through the prime an area of 15-2-63.3 rai located near the BTS head areas in Bangkok, covering the business district and office. a number of shopping areas. On 3 July 2004, Bangkok Metro PLC (BMCL), the underground ƒ Plans to diversify to advertising business train operator, commenced services. In contrast with On 13 March 2009, BTSC signed a sale and BTSC, BMCL is responsible only for subway purchase agreement (SPA) with FN Asia Advisory operations and station area management. The huge Co., Ltd. (FN Asia) to purchase all the shares of infrastructure investment was financed by the VGI Global Media Co., Ltd. (VGI Global) at a price government. However, compared with BTS, the of Bt2,500 million. The cash portion is Bt2,000 BMCL routes cover less attractive spots and have million and the remainder of Bt500 million will be less daily commuters. arranged as a share swap. On 26 March 2009, the company placed a Bt1,000 million deposit with FN Asia while FN Asia pledged 51% of the shares of

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Chart 1: Mass Transit System Ridership in As can be seen from Chart 2, the number of Bangkok new registered private vehicles in Bangkok increased almost every year until 2007 when a weaker economy and higher fuel costs discouraged demand for private vehicles. Though increasing, ridership of the electric train systems run by both operators has been much lower than the projections made before the projects started. As a consequence, both electric train companies have suffered losses for longer than expected.

Note: BMCL = Bangkok Metro PLC Chart 3: Ridership of BTS and BMCL BTS = Bangkok Transit System BMTA = Bangkok Mass Transit Authority Sources: 1) Office of Transport and Traffic Policy and Planning 2) Bangkok Metro PLC 3) Bangkok Mass Transit System PLC

ƒ Train ridership increasing, though slower than expected Of the variety of mass transit systems, electric trains offer one of the most convenient means to Sources: 1) Bangkok Metro PLC commute around a city. Train commutes are safer, 2) Bangkok Mass Transit System PLC more punctual, more rapid and probably cheaper than many transportation modes. These benefits are Several reasons explain the lower-than-expected even more pronounced when compared with the city ridership: high-income earners use personal cars; traffic congestion and soaring fuel costs. the limited coverage area of existing train routes; The total number of Bangkok residents using and higher fares for the electric train compared with public buses operated by the Bangkok Mass Transit public buses or government-subsidized ordinary Authority (BMTA) has declined steadily. In trains. The increase in electric train ridership in contrast, ridership of the electric train systems recent years has been driven by the network has increased. However, as Chart 1 shows, total expansion, the opening of the MRTA , and ridership of public transportation declined. This more land development along the routes of the two indicates that transportation by private vehicles, train systems. including personal cars and motorcycles, has According to reports made by the Office of increased. In addition, one may expect that lower Transport and Traffic Policy and Planning (OTP), ridership of the public transportation system could the combined number of ridership of the two be offset by the increasing ridership of private electric train systems reached 198 million trips in transportation systems such as unregistered private 2008, increasing slightly from 197 million trips a minivans or buses. year earlier.

Chart 2: New Private Vehicles Registered in Picture 1: Mass Transit System Expansion Bangkok* Projects

Note*: Vehicles registered under Motor Vehicle Act Source: Office of Transport and Traffic Policy and Source: Department of Land Transport Planning (OTP)

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The ridership growth rate has slowed since and planning for the whole country, and for 2006 as the Thai economy weakened and ticket coordinating among the various agencies. The prices rose. In 2007, electric train ridership declined responsibilities of the OTP cover all aspects of for the first time amid the economic slowdown and traffic policy, including highways and rail systems. a Bt5 hike in BTS fares. The responsibilities of the BMA, MRTA and SRT are limited to project planning and design, ƒ Route expansion draw future passengers implementation management, and concession The Thai government has long aimed to expand management. the electric train systems. However, because of However, the successful completion of the numerous political and economic uncertainties, only BTS- extension encouraged BMA to two networks have been opened albeit with limited engage in other mass transit projects. BMA recently coverage areas. Nine electric train projects were requested the government permission to be recently approved, but these projects were just responsible the green line. renewals of idea initiated several years ago. The In principle, ticket prices of electric trains new rail projects were marked by colours: the red operated by both BTSC and BMCL are adjusted line, dark green line, light green line, , according to the contracts made with the blue line, , , and government. The factors that determine the price . adjustments include inflation and major operating Out of the nine electric train projects approved costs. Since opening in 1999, BTS has adjusted by the Cabinet in early 2008, the construction of the minimum fares only once, in December 2006. purple line is expected to begin in 2009. This is BMCL raised the fare for the first time in 2006. expected to be followed by construction of the red line, under the direction of the State Railway of BUSINESS ANALYSIS Thailand (SRT). The Thai government has already ƒ Good location in downtown Bangkok signed a loan agreement with Japan International BTS’s network runs through downtown Cooperation Agency (JICA). The remaining Bangkok, serving residential areas, the central projects, however, have yet to be designed. business district (CBD), and key commercial areas. While waiting for new projects, extensions of The network passes Silom, Sathorn and Sukhumvit existing routes can be completed more easily. On 15 roads which have the highest numbers of office May 2009, a 2.2 kms BTS extension on the Silom buildings, residential condominiums, and prominent route started operation, connecting the Bangrak and shopping complexes in Bangkok. According to CB Thonburi districts. This marked the first extension Richard Ellis (Thailand) Co., Ltd., as of March of the electric train system across the Chao Phraya 2009, there were about 3.91 million sq.m. of total River. The extension is free of charge until the office space in the CBD with an occupancy rate of end of August 2009. It is expected to significantly 85.5%. The total downtown condominium supply increase ridership of both the BTS and BMCL reached 58,006 units, increasing 1,737 units or 3% systems. This extension makes it easier for from the year ended 2008. The greater the land Thonburi residents to connect with existing mass development along the BTS route, the greater the transit routes. number of potential users of the BTS. The other extensions under construction are 1) on the Sukhumvit route, connecting On Nut Picture 2: BTS and MRTA Blue Line Map and Baring of approximately 5.2 kms long: the construction of all civil works is expected to be complete in September 2009 and commence operation in the first quarter of 2011, and 2) on the Silom route, the further extension of the 2.2 kms from Wongwien Yai station to Bang Wah of approximately 5 kms long: the construction of the viaduct was completed and is expected to commence operation in 2011.

ƒ Mass transit policies directed by many government agencies Four government agencies oversee the railway transportation infrastructure in Bangkok: OTP, the BMA, MRTA, and SRT. In 1992, the government Source: BTSC made the OTP responsible for transportation policy

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ƒ Proven management track record for the fiscal year ended March 2008 as a result of a Ridership during the initial years was far below fare hike and an economic slowdown. However, the feasibility study estimates. Ridership in fiscal ridership in the fiscal year ended March 2009 year 2000 averaged at 161,140 trips per day, or recovered as evidenced by an increase of ridership approximately 30% of the feasibility study by 2.3%, compared with the prior year. projection. This poor performance was in part Approximately 40% of BTS ridership is regular related to the fare structure, which was considered passengers traveling from home to work or rather expensive compared with competing bus school and vice versa. This group of passenger is services. In addition, there was little integration of less sensitive to fare hikes than non-frequent the BTS and other modes of transportation. There passengers but it is more easily affected by were no easy interchanges for buses and no park- economic conditions. The average travel distance is and-ride facilities. However, BTSC’s management approximately 6-7 stations per passenger. BTS has tackled these problems rather efficiently. ridership reached 10 million trips per month for the A new pricing strategy was introduced to make first time in fiscal year 2005. This rise was partly BTS more affordable for commuters. Since the first due to the opening of the underground system in year of operation, the company launched monthly July 2004. stored value tickets for both adult and student In fiscal year 2009, total ridership was passengers, with discounts of up to 55% for 132,884,578 trips. The weekday average daily adults and 70% for students. In 2001, the company ridership was 429,004 trips; the average daily introduced free shuttle bus service on five different ridership (including weekends) was 372,438 trips. routes to attract new passengers. Due to high TRIS Rating expects that total ridership in fiscal operating cost and rising familiarity with BTS, the years 2010-2012 will materially increase following company stopped providing the shuttle bus service the opening of the Silom extension on 15 May 2009, in 2005. The shuttle service was replaced by public the opening of Airport Rail Link in the second half transportation such as vans and hired motorcycles. of 2009, and the opening of the Sukhumvit line Free shuttle service is still provided on some routes, extension in early 2011. The Bus Rapid Transit by companies or by owners of buildings located system (BRT), which is expected to feed passengers near BTS stations, to accommodate the needs of to BTS, is not likely to operate in the medium term. their employees and customers. BTSC also The first BRT line, running from Chong Nonsri cooperated with the BMA and the Treasury BTS station, across the Chao Praya river, and Department to open a park-and-ride outlet close to finishing at Ratchada-Ratchapreuk road, was the Mo Chit station in 2005. The outlet can originally scheduled to start operation in mid-2009. accommodate approximately 1,200 cars. The BMA, the project owner, recently suspended From an operating standpoint, BTS has been the project. The project is under investigation by quite successful. Punctuality has continuously the Department of Special Investigation (DSI) improved. A delay of more than five minutes concerning irregularities in the purchase of the occurred only once in 1,044 trips in fiscal 2002 and buses. improved to once in 1,796 trips in the fiscal 2007 but dropped to 956 trips in the fiscal year ending ƒ Fare hikes affect infrequent passengers March 2009. This drop was the result of train There is a negative correlation between ridership delays during evening peak hours in August 2008. of infrequent passenger and fare hikes, especially No passenger has been seriously injured since the single journey ticket (SJT) passengers. For the fiscal BTS commenced operations. The operating cost per year ending March 2008, the number of average km traveled has declined from Bt120,899 in fiscal daily SJT passengers declined by 12% to 166,592 year 2001 to Bt88,813 in fiscal year 2007 as the trips, down from 188,992 trips in 2007. While the company successfully negotiated with Siemens to decline may reflect switching from SJT to stored reduce maintenance costs. However, the operating value tickets (SVT), the number of passengers cost per km increased to Bt102,989 and Bt165,919 switching was not believed to be significant. in fiscal 2008 and 2009, respectively, due to the Overall, daily ridership declined 4% from 379,600 major overhaul of both rolling stock and track. The trips in 2007 to 363,073 trips in 2008. Nonetheless, operating cost per km is expected to decline to the the average fare paid by passengers increased by previous level as the overhauls have been 9.5% from Bt22.13 in 2007 to Bt24.25 in 2008. completed. Although the fare hike appears to negatively affect the ridership, the impact was temporary, ƒ Strong ridership with potential to increase especially for frequent passengers. The number of Ridership continuously increased during the trips bounced back from average of 406,597 trips first seven years at a compound annual growth rate per weekday in fiscal year 2008 to an average of (CAGR) of 14%. However, ridership fell by 4.09% 429,004 trips per weekday in fiscal year 2009. ______Bangkok Mass Transit System PLC 7 17 July 2009

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Promotion campaigns by offering SVT passenger of increased from 54% in fiscal year 2008 to 58% in 25% discount during June to August 2008 were the fiscal year 2009. successful. The proportion of SVT passengers

Table 1: Daily Ridership Unit: Trip Ridership Mar 2002 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Average ridership/day 217,133 264,360 287,147 324,561 361,335 379,600 363,073 372,438 Weekday ridership/day 243,507 300,683 328,857 370,547 411,437 434,797 406,597 429,004 Saturday ridership/day 197,490 229,205 236,615 276,011 308,181 327,672 323,916 318,462 Sunday ridership/day 143,267 163,362 168,567 196,940 221,225 234,924 234,080 206,638 Source: BTSC

Table 2: Proportion of Types of Tickets Unit: % ƒ Diversified to property development and Type 2003 2004 2005 2006 2007 2008 2009 advertising Single journey ticket 48 47 49 48 50 46 42 Stored value ticket 52 53 51 52 50 54 58 Property: Source: BTC BTSC will develop property through two ƒ Fare adjustment mechanism linked to subsidiaries, Nuvo Line and UniHolding. Currently, inflation the company has five real estate development The BTS uses a fare-by-distance system. Fares projects located on Phaholyothin road (Ladprao and are based on the number of stations traveled. Chatuchak), (Nana), Phayathai Currently, fares start at Bt15 with Bt5 increments, road, and South Sathorn road. These projects are to the highest fare of Bt40. This fare is still lower planned for development during 2009-2012. The than the initial maximum fare specified in the total investment cost is projected to be Bt17,600 concession. As stipulated in the concession agree- million. The first property development project will ment, the maximum fare adjustment mechanism is be on South Sathorn road: a 29-storey hotel. The directly linked to changes in the Bangkok consumer hotel will be managed by Starwood Hotels and price index (BKK CPI), which is reviewed annually. Resorts Worldwide Inc. under the Four Points by The company is entitled to raise the maximum fare Sheraton trademark. Construction is expected to be by 7% for each 5% increase in the BKK CPI. The completed in 2012. BTSC will start to realize cash fare charged to passengers at any time must not be flow from the hotel in fiscal year 2013. Another higher than the maximum fare. The fare schedule is project which is expected to start in 2009 is a reviewed every 18 months, or more frequently if high-rise residential condominium project on approved by the BMA. Phaholyothin road near Central Department Store New fare schedules have to be sent to the BMA (Ladprao branch). The projects on Nana and in writing and communicated to the general public Phayathai and Ladprao are currently in the 30 days before the new fares take effect. Since feasibility review stage. The company’s property commencing commercial operations, the maximum development strategy is to focus on the medium-to- fare has never been changed. The company decided high-end segments. to forego a maximum fare increase due to lower- Though property development has a higher risk than-expected ridership and the fact that some profile than the mass transit business, the risk is headroom remained to increase the fare. Fares were mitigated by a cautious investment policy. Projects increased in December 2006. The minimum fare for will be developed only along the rail routes. In a SJT and SVT increased from Bt10 to Bt15 while addition, the company has flexibility in the planned the longest distance charge remained unchanged at investments program and project launches as all Bt40. land bank are funded by operating cash flow. The Though the fare adjustment mechanism is company has no pressure to continuously launch clearly stated in the concession agreement, the new project as would a typical property developer. BMA may dispute any request to increase the fare. Advertising: Table 3: Fares Based on Number of Stations Advertising will be done through VGI Global Traveled Ltd. (VGI) and its subsidiaries. VGI has been Station 0 1 2 3 4 5 6 7 8 9 10 11 12 No. of Station awarded an exclusive license to market all Up Fare rate 15 20 25 30 35 40 commercial areas and advertising in BTS Maximum fare rate 45 stations. VGI is responsible for all investments Source: BTSC and operation, while BTSC receives a minimum ______Bangkok Mass Transit System PLC 8 17 July 2009

N e w s f o r I n v e s t o r s guaranteed amount of revenue or 50% of gross capital injection and a massive reduction in revenue from the use of advertising space and debt, as of March 2009, total debt was Bt14,751 merchandising areas, whichever is greater. Apart million, including not yet due interest of Bt4,895 from the concession from BTSC, through its million but excluding convertible debentures of subsidiaries, VGI Global has also been awarded Bt5,745 million. TRIS Rating treats convertible concession rights to manage and use advertising debentures as equity because the terms of these space and LCD screen in TESCO and Lotus Express debentures stipulate that the outstanding debentures stores, and advertising areas in Big C stores. BTSC must be converted into ordinary shares on the expects to consolidate the financial statement of maturity date or on the issue date of these rated VGI Global in the second half of fiscal year 2010. debentures, whichever comes first. BTSC is highly optimistic about the future of VGI Group. Cash flow from VGI Group is ƒ Heavy capital expenditures planned expected to grow at double-digit rates for the Planned capital expenditure over the next four next four years. VGI Global will be the major years will be total Bt21,000 million. Approximately revenue contributor in which revenue growth will be Bt2,400 million will be for the rail business, to based on more advertising space on 12 new trains, modify the signaling system, upgrade radio two new BTS stations in 2009, and expected five signaling and purchase rolling stock. These new BTS stations in 2011. Moreover, as a wholly- investments will be financed by operating cash owned subsidiary of BTSC, VGI Global expects to flow. Another Bt1,000 million will be used to pay save on the building and land tax paid to BMA. the remaining purchasing amount in VGI Global. This too will be funded by operating cash flow. FINANCIAL ANALYSIS The remaining Bt17,600 million will be invested in ƒ Strong operating performance property development projects located on South For the fiscal year ended March 2009, BTSC Sathorn, Nana, Phayathai and Phaholyothin roads. reported net profit of Bt21,911 million of which The projects include residential condominiums, Bt22,447 million was a gain from business serviced apartments, and hotels. Funding for the rehabilitation. Revenue from fares accounted development projects will be a combination of debt for 90% of total revenue. The other 9% was the and operating cash flow. The debt to equity ratio of concession fee paid by VGI Global for the license the property business is expected to be 1.5 times. to manage marketing and advertising on BTS On 12 May 2009, UniHolding, the subsidiary, stations. signed an eight-year long-term loan agreement with BTSC has recorded strong operating Bangkok Bank for Bt1,800 million to finance the performance. For the fiscal year ended March construction of the hotel project on South Sathorn 2009, operating margin was 52.77%, down from road. 60% in fiscal year 2007. The decline was mainly due to higher maintenance expenses. BTSC started ƒ Strong financial profile will weaken as debt major overhauls of its system and rolling stock in level rises fiscal year 2008. The maintenance was materially BTSC’s post-rehabilitation financial profile is complete in fiscal year 2009, one year ahead of the strong. As of March 2009, the adjusted debt plan. Repair and maintenance costs accounted for (excluding convertible debentures) to capitalization almost half of direct operating expenses (excluding ratio was 31.39%, compared with 121.5% in the depreciation), followed by staff costs (30%) and previous year. The FFOs to adjusted debt ratio was electricity (15%-18%). 10.7%. Though capital spending is expected to Going forward, operating performance will be exceed operating cash flow in some periods for the weaker resulting from the financial consolidation next four years as the property development projects of the property development business. Operating get underway, the company is expected to control margin is expected to decline as property debt to capitalization ratio at around the current development has a lower margin than the rail level. business. Operating cash flow is expected to be more volatile as property development business is more volatile and sensitive to economic condition than the rail business.

ƒ Significantly improved financial leverage after exiting rehabilitation plan Financial leverage (company only) improved considerably after BTSC completed the rehabilitation plan. With fresh funds from a ______Bangkok Mass Transit System PLC 9 17 July 2009

N e w s f o r I n v e s t o r s

Financial Statistics and Key Financial Ratios

Unit: Bt million ------Year Ended 31 March ------2009* 2008 2007 2006 2005 2004

Revenue 3,658 3,530 3,311 3,035 2,777 2,484 Gross interest expense 2,080 3,542 3,456 2,663 1,772 1,637 Net income from operations (793) (2,289) (1,599) (1,690) (1,959) (1,405) Funds from operations (FFO) 1,578 2.091 1,913 (1,038) (1,360) (714) Capital expenditures 963 1,123 250 116 211 41 Total assets 52,888 49,764 43,635 42,549 48,960 49,329 Total debt 19,709 59,210 61,704 43,828 40,141 39,788 Adjusted debt 14,751 59,210 61,704 43,828 40,141 39,788 Shareholders’ equity 32,635 (16,247) (18,647) (6,647) 4,118 6,077 Depreciation & amortization 927 829 824 901 816 725 Operating income before depreciation and amortization 52.77 54.46 60.00 52.19 13.10 37.44 as % of revenue Pretax return on permanent capital (%) 7.13 3.00 5.35 2.95 (0.49) 0.59 Earnings before interest, tax, depreciation and amortization 1.06 0.58 0.78 0.70 0.35 0.58 (EBITDA) interest coverage (times) FFO/total debt (%) 8.01 3.53 3.10 (2.37) (3.39) (1.79) FFO/Adjusted debt (%) 10.70 3.53 3.10 (2.37) (3.39) (1.79) Total debt/capitalization (%) 37.65 121.50 143.31 117.88 90.70 86.75 Adjusted debt/capitalization (%) 31.39 121.50 143.31 117.88 90.70 86.75 * Consolidated financial statement

______Bangkok Mass Transit System PLC 10 17 July 2009

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Each of TRIS Rating’s short-term debt instrument covers the period of not more than one year.The symbols and definitions for short-term ratings are as follows: T1 Issuer has strong market position, wide margin of financial protection, appropriate liquidity and other measures of superior investor protection. Issuer designated with a “+” has a higher degree of these protections. T2 Issuer has secure market position, sound financial fundamentals and satisfactory ability to repay short-term obligations. T3 Issuer has acceptable capacity for meeting its short-term obligations. T4 Issuer has weak capacity for meeting its short-term obligations. D The rating for an issuer for which payment is in default. All ratings assigned by TRIS Rating are local currency ratings; they reflect the Thai issuers’ ability to service their debt obligations, excluding the risk of convertibility of the Thai baht payments into foreign currencies. 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TRIS Rating may announce a “CreditAlert” as a part of its monitoring process of a publicly announced credit rating when there is a significant event that TRIS Rating considers to potentially exerting a substantial impact on business or financial profiles of the rated entity. Due to an insufficient data or incomplete developments of the event, such as merger, new investment, capital restructuring, and etc., current credit rating remains unchanged. The announcement aims to forewarn investors to take a more cautious stance in investment decision against debt instruments of the rated entity. CreditAlert report consists of a “Rational” indicating warning reasons, a “CreditAlert Designation”, and a current credit rating. Rating Outlook is withheld in the announcement. CreditAlert Designation illustrates a short-term rating outlook indicative of the characteristics of impacts on the credit rating in one of the three directions (1) Positive (2) Negative and (3) Developing.

______Bangkok Mass Transit System PLC 11 17 July 2009

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______Bangkok Mass Transit System PLC 12 17 July 2009