Rabbit Holdings Public Company Limited (RABBIT) Earnings Call Transcript

Good afternoon, and welcome to U City's Third Quarter 2022 Analyst Meeting. As usual, we have Mr. Soraya Satiangoset, CEO and CFO of U City joined together by the IR team of U City, Mr. [indiscernible], and myself, Mr. [indiscernible].

To start out the presentation, the agenda will be divided to 4 sections. Firstly, the key highlights and business updates. Secondly, the financial performance and operational updates, followed by the Q&A session.

For the third quarter, starting from the total revenues. The total revenue increasing by 79% year-on-year to THB 2,137 million in this quarter. For this quarter, we recorded net loss of THB 266 million compared to the net loss of THB 364 million in the previous year, thanks to the rebound of the tourism sector and also our vision of investing in insurance business. In this quarter, we recorded the net loss, mainly from the higher depreciation from the partial derecognition of asset held for sale related to the disposal of Vienna House, which I will elaborate more in the next coming slides. However, our EBITDA was THB 512 million, increasing by 25% year-on-year. The net interest-bearing debt to equity was 0.39x in this quarter. Before we move into our key development in this quarter, may I again reiterate U City transformation [indiscernible] from real estate business to the financial services business. Since our real estate business is under pressure from the prolong of COVID-19, which resulted in lower return with the high-risk volatilities. Meanwhile, the financial services business is paying a high growth, the higher ROE and demonstrating the resiliency compared to the hospitality business. Moreover, in financial business, the U City is unable to leverage the completeness of BTS 3M Strategy or 3M platform, move, mix and match. With a lot of partners under match business, we can generate synergy with a partner under BTS Group and also the deep data from the mixed business, which have more than 40 million reachable audiences. Coming to our business update in this quarter, Rabbit Life, our insurance business launched a new product known as HERO 10/3. The launch of this insurance product was driven by the ever-changing trends within the insurance industry, which now the younger generation is integrated with a higher return, with a quicker return time frame. The HERO 10/3 is an investment integrated product where the customer pay an insurance premium for over 3 years, but they can have a 20% refund from the premium sum from the first year with the coverage up to 10 years. This slide shows the big picture of our real estate divestment plan, which will be completed in 2025, comprising of hotels of THB 14 billion, the office and commercial unit of THB 7 billion, projects of THB 9 billion and lands of THB 3 billion. The expected proceeds of THB 33 billion is expected to be used in investing in financial services and investment for our future growth. In 2022, you can see that we plan to divest our asset of THB 6 billion. As of now, we nearly completed the divestment of the amount of THB 6 billion comprising of [indiscernible] we saw [indiscernible] in the first quarter, the partial hotel operator subsidiaries under the Vienna House, the several [indiscernible] and also the upcoming this portion of 7 JVs with Noble to Thanulux. On the disposal of Vienna House group, this transaction is quite complicated and affected to our financial statement, so I will go through this transaction slowly. Start with a left-hand side, as of 30 August 2022, the company U City and subsidiaries, VHC and LEH, entered into agreement to sell the Vienna House Hotel Group, which is in the blue box to the buyer, which is the HR Group, the multibrand operator based in Germany to dispose our Vienna House Hotel Business Group with a purchase price of THB 5.6 billion. But the buyer has a difficulty to inquire loan from the bank due to the [indiscernible] Russia and the Ukraine. So later on 7 September 2022, the buyer of HR Group decided to buy only the Orange bar, which is the only operation and management part of the company under the VHC with the purchase price of THB 1.5 billion. On the left-hand side, you can see the hotel list of the Vienna House under this transaction. The Orange highlights the hotel that was disported to [indiscernible]. Furthermore, after the disposal [indiscernible] entered into the Operating Lease Agreement to lend our remaining hotel in the [ wide ] 1 and also the #6, #8 and #17 to the HR Group and then the buyer or the HR Group, we will pay our rental fee in the amount of [indiscernible] per year until the transaction is completed. For the remaining hotel, which entered into the Operating Lease Agreement, we are expected to sell this in the next 3 years. This is the reason of the partial derecognition of the asset held for sale, where the completion shifted from 1 year to 3 years. On the 30 September, the company announced its intention to dispose the 7 JVs with Noble [indiscernible] comprise of the condominium hotel house project with Noble [indiscernible], the Noble Ratchada Ladprao, Nue District R9, Nue Cross Khu Khot Station, and Nue [indiscernible] project, which is the Noble at Suksawad, and Noble River Side at Ratburana. The transaction of this -- the transaction with Thanulux, we will have the proceeds of around to THB 2.4 billion divided to the equity of THB 532 million, which we expected to receive this amount in December this year. And the second is the shareholder loan of approximately THB 1.9 billion, which we expected to receive in June 2023. As part of this transformation to the Financial Services business, U City unviewed the announcement of this new company name, changed from U City Public Company Limited to the Rabbit Holdings Public Company Limited. However, there is postal of 7 JVs with Noble to Thanulux and the changing name are subject to the shareholders' approval at the AGM to be held in this month on 24 November. These are our key highlights and business updates for this quarter. May I hand over to [indiscernible] for the financial review.

So moving on to the financial performance for this section. This quarter, the company reported total revenue of THB 2.1 billion, an increase of 79% year-over-year from higher insurance revenue contributed by Rabbit Life, high hotel revenue and from the rebound of the hospitality business. EBITDA was THB 512 million, a 25% year-over-year increase, mainly from the increase in operating revenue from insurance and hospitality business as well as other revenues. However, the company recorded a net loss of THB 266 million year-over-year, improving from the net loss of THB 364 billion in the third quarter of last year, due to the improving EBITDA and lower share of loss. At the bottom right -- on the bottom left-hand side for revenue contribution in this quarter, hospitality business contributed 45% of the total revenue followed by financial and other insurance businesses of 17%, office at 5%, management at 3%, sale of real estate 4%, and among others, 25%. On the right-hand side, in terms of revenue growth contribution, our overall businesses continued to gradually grow over time. Moving on to the financial performance overview. Operating revenue was recorded at THB 1.6 billion, a substantial increase of 94% year-over-year due to higher recognition from the insurance and recovery of the hotel business. However, finance costs rose by 103% year-over-year or THB 228 million, mainly from loans from financial institutions for additional investments in the Financial Services business. Additionally, depreciation and amortization amounted to THB 386 million due to the derecognition of partial assets held for sale of Vienna Household Sale Group due for completion within the next few years. Lastly, the company recorded THB 429 million, mainly from gain on sale of ordinary shares in Vienna House Hotel Group held by VHC. If you'd like to see the other revenue separately, the green bar indicated here indicates a THB 535 million, where the gain on sale from disposal of Vienna House Hotel Group was THB 263 million. Moving on to the balance sheet for this quarter. The balance sheet for this quarter shows the total assets as of 30 September 2022 of THB 70 billion decreasing by 9.1% from 31 December '21 -- 2021. The decrease was from assets held for sale from disposal of Vienna House Hotel group businesses held by VHC, cash and cash equivalents, mainly from repayment of loans from financial institutions. However, the decrease was offset by an increase in property, plant and equipment from the mentioned -- previously mentioned, derecognition of partial assets held for sale of Vienna House Hotel group due for completion in 3 years. Moving on to the cash flow of 30 September 2022. The cash and equivalents were THB 1.8 billion, with net cash from operating activities of THB 735 million. Net cash used in investing activities of THB 10 million and cash used for financing activities of THB 1.7 billion and others of THB 97 million. At the bottom right-hand side, moving on to the CapEx and property investments, the company recorded the CapEx and property investments year-to-date of THB 7 billion for purchase in long-term financial assets, other investments and investment properties as well as property, plant and equipment. Lastly, for the debt structure, the company had a total interest-bearing debt of THB 20 billion as of 30 September 2022, increasing from THB 18 billion at the end of 2021. Whilst the net interest-bearing debt to equity was 0.39x compared to 0.37x at the end of the 2021. For the portion of our breakdown interest, the floating rate was 92%, while fix was 8% and on the right-hand side showed the breakdown by currency, which [indiscernible] equivalent would be 86%, while euro is 14%. Moving on to the operational updates. Firstly, for the insurance business, U City invested 75% in Rabbit Life. And within this quarter, we have expanded our 420 agents and have set our targets at 500 at the end of this year and are expected to pass the targets. The recorded insurance revenue on your right-hand side in this quarter was THB 434 million, out of which 85% consists of the premiums earned and 15% from investment income. The revenue breakdown is broken into 2 segments. The first one is the investment income breakdown where the interest income makes up the majority contribution by 97%. And on to your right-hand side, the premium earned breakdown is where stable premiums make up the majority of the income at 61%, renewable premiums at 20% and 19% for the first year premiums. Additionally, the breakdown by channel, 62% was majorly from the wealth channel, followed by 26% from telemarketing. In the future, we aim to reach more markets and customers via BTS Group's 3M network of move, mix and match. Moving on to the CAR ratio. This is calculated by the capital accuracy of the company -- pardon me, which displays the capital adequacy of the company. This is calculated by total capital availability divided by total capital required. In this quarter, the CAR ratio of Rabbit Life was 322%. If we compare this to the top 10 insurance companies in Thailand, we are placed at #7 as of the third quarter of this year. Moving on to the Financial Services business. In December 2021, last year, U City invested 9.9% in JMART and 24.9% in SINGER as part of its financial services portfolio. In this quarter, SINGER recorded a net profit of THB 261 million and SINGER's net profit year-to-date has reached THB 741 million, already surpassing the profits from the previous years. Therefore, we can expect profit in the next quarter where SINGER will be available to record an all-time high net profit by the end of this year. Additionally, in this quarter, we received a total dividend income from both JMART and SINGER amounting to THB 122 million. Moving on to the hospitality business in Europe. Revenue increased year-over-year due to the gradual recovery of the tourism industry led by the easing of COVID-19 restrictions across Europe. This has resulted in higher average daily rates, occupancy rates and revenue available when compared to the third quarter last year. However, total operational keys for this quarter were 6,380 keys decreasing from last quarter -- pardon me, last year, as U City disposal of the Vienna House Hotel Group in Europe and a cancellation of management agreement of Eastin Grand Hotel Nha Trang in Vietnam. The revenue breakdown for our Q2 2021 was THB 633 million from owned totals. On your top left, whereas THB 127 million were from operating leases bring the total to THB 760 million from the overseas hotel. Additionally, the hotel average daily rates, occupancy rates and revenue per available room rose significantly as compared to the third quarter of 2021 last year owing to the tourism recovery. For the hospitality business in Thailand, revenue also increased hugely year-over-year, led by the recovery of the tourism industry. This has resulted in higher daily average rates, occupancy rates and revenue per available room compared to the last 3Q last year -- 3Q quarter last year. The revenue for this year was THB 162 million from owned hotels, whereas THB 40 million were from operating leases, bringing the total to THB 203 from total operations in Thailand. Additionally, the hotel average daily rates, occupancy rates and revenue per available room rose significantly compared to Q3 2021 last year, owing to, again, the recovery of the industry -- tourism industry. Lastly, for Vienna House, management revenue decreased year-over-year, mainly from the decrease of 1,543 keys from management contracts from the cancellation of Eastin Grand Hotel, Nha Trang, Vietnam as well as the disposal of Vienna House Hotel Group in Europe. Moving on to the rental segment. Office buildings, the overall occupation rate slightly declined from the previous quarter to 88.1%, mainly from TST Tower, where the occupancy rate dropped from 100% to 99.5% in this quarter. Noble commercial building and Gracechurch Street office building in London remain at 100% and 64% occupancy, respectively, whereas the commercial unit building occupancy rate remained the same as previous, at 100%. For the residential segment, there are 3 ready-to-move [indiscernible] projects -- condominium projects under JV with SANSIRI, which are on sale, which includes KHUN By Yoo, BASE Saphanmai and THE LINE Phahonyothin Park with the total presale backlogs in 2022 of THB 841 million. Lastly, for projects under the development, the Unicorn, Phayathai completion was at 86% and is expected to fully commence in the second quarter of 2023. Meanwhile, The Langham Custom House Bangkok is at 12% completion and construction is expected to be fully completed by 2025. That concludes U City's third quarter presentations. Thank you.