Rabbit Holdings Public Company Limited (RABBIT) Earnings Call Transcript

Good afternoon, all analysts and [indiscernible], welcome to Rabbit Holdings Second Quarter 2023 Analyst Meeting. This quarter, as usual, we have Soraya Satiangoset, our acting CEO and CFO of the company.

[Foreign Language].

And [indiscernible].

[Foreign Language].

For the agenda today, we would like to report on the financial performance, also the operational performance, and then we'll go through the Q&A session. I would like to hand over to [indiscernible] to present to you our performance.

So let's get started. Moving towards the second quarter of 2023, the snapshots of Rabbit Holdings are total revenue of THB 1.6 billion, decreasing by 32% year-over-year, and total expenses increased by 74% year-over-year. More details will be disclosed as we go through the presentation. Before we proceed, may I again repeat our Rabbit Holdings transformation from its real estate business to the financial services business. At present, its financial services business includes life insurance under Rabbit Life and AMC debt collection under Prime Zone Asset Management, where the transaction is expected to finish this year. In line with the company's business transformation in the last 2 years, it has successfully divested its real estate assets totaling THB 5 billion, comprising of its European hotel portfolios and sales of its real estate joint venture projects. For 2023, the company will continue to pursue its divestment plans aiming to dispose of its real estate projects forecasted at THB 3 billion. We aim to dispose of our real estate portfolios by 2025 estimated it would bring in net proceeds of THB 34 billion, which will be used to strengthen, expand and sustain the future growth of our financial services business. In the previous quarter, the company announced its intention to invest a 70% stake ownership in the Prime Zone Asset Management through its wholly owned subsidiary, RBH Ventures. Prime Zone Asset Management consists of a management team with expertise within the AMC business. It started securing NPLs and specialized in personal loan management, debt restructuring and adding value to assets acquired or NPAs. The total investment of this transaction is valued at THB 900 million. And on the 3rd of June, the first phase of transaction has already been completed as the company already acquired a 62.5% shareholding with a total investment of THB 500 million. In this quarter, significant events, all the resolutions were approved at our Annual General Meeting of Shareholders held in April 2023. The Unicorn has been officially launched and opens its stores to the public on 19 May 2023. In April 2023, the company successfully disposed 40% of its Hotel management platforms, Absolute Hotel Services as part of its exit strategy from the real estate sector, which will affect the operational hotel keys. As previously mentioned, the first phase of the investment in Prime Zone Asset Management has been completed on the 3rd of July. And consequently, the company's second conversion of preferred shares to common shares was also completed, where the total generated conversion was 29,300 of rapid P shares, which were converted to rapid common shares. Moving on to the financial performance. This quarter, the company recorded a total revenue of THB 1.6 billion, a decrease of 32% year-over-year, mainly contributed by lower revenue from its hotel operations, from the disposal of our European hotel portfolio, lower insurance revenue income due to the decrease in premiums earned, especially the single premiums. However, if we compare it to quarter-to-quarter, the revenue increased by THB 500 million due to higher gains on FX. In this quarter, the share of loss was THB 658 million, mainly contributed by investments in SINGER of THB 583 million. Finance cost was THB 194 million, decreasing by 18% year-over-year and 10% quarter-over-quarter largely from the repayment of loans. Overall, the company reported a net loss of THB 1.8 billion, mainly from the impairment of SINGER at the amount of THB 1.5 billion and share of loss from investments in associates and joint ventures. Towards your right-hand side, you can see the total revenue contribution divided by the company's segment. Real estate accounted for 44%, Insurance accounted for 12% and others contributed 44% of total revenue. Right below is the revenue growth contribution. As you can see, insurance business fell by 49%, real estate fell by 44% and others fell by 4%. Moving on to the financial position. The balance sheet for the second quarter of 2023 shows total assets as of 30 June 2023 was THB 63 billion, decreasing by 8% from December last year. The decrease was from other financial assets, largely from fair value measurement, investment in associates mainly from the allowance for impairment loss on investments in SINGER and long-term loans to the related parties and interest receivables from the repayment of loans from [indiscernible]. Moving on to the cash flow for this quarter. As of 30 June 2023, the ending cash was THB 2 billion with net cash from operating activities of THB 1.3 billion, net cash used in investing activities of THB 71 million and net cash used for financing activities of THB 532 million, mostly from loan repayments. Moving on to the CapEx and property investments. The company recorded CapEx and property investments of THB 3.5 billion for purchases and long-term financial assets, other investments and investment properties. Lastly, for the debt structure. For this quarter, the company has a total outstanding debt at THB 18.1 billion. And on the right side displays the breakdown by currency, which Thai Baht is equivalent to 76% and the remaining accounts for 24% euros. For the portion of breakdown interest, floating rate was 92%, while fixed was 8%. On the bottom, the company had a total interest-bearing debt of THB 18.1 billion for this quarter, decreasing by THB 263 million compared to the end of last year. Whilst net interest-bearing debt to equity was 0.43x, an increase from 0.39x at the end of 2022. Moving on to the operational updates. First, for our financial services. For the insurance business, once again, I'd like to repeat our journey, Rabbit Holdings invested a 75% stake in Rabbit Life in 2021 and has been ranked in #7 of market share in terms of sales via digital platforms. And in this quarter, Rabbit Life ranked in at #16 in market share in terms of gross premiums. This year, Rabbit Life has set new targets to recruit 1,000 agents and has set its new gross premium target at THB 2.5 billion to THB 2.8 billion. As you can see below, for the first half of 2023, Rabbit Life has already achieved 51% of it's attended targets. Moving on for the insurance revenue breakdown this quarter. The Insurance segment bought THB 119 million, and the breakdown consisted of premiums earned amounting to THB 122 million. Investment income and others registered at THB 68 million. A year-over-year comparison exhibits the breakdown comparison by premium types. First year premiums increased by 10% to THB 43 million. Meanwhile, single premiums dropped by 99% due to changes in our product mix in this quarter and the reclassification of TFRS. On the right-hand side, the breakdown by comparison channel type shows that Rabbit Life's agent increased the number of premiums earned in the amount of THB 45 million, a substantive growth of 130% year-over-year. This was owed to the successful agent recruitment goals it achieved last year. Meanwhile, on the upper right-hand side, the breakdown comparison for this quarter grew slightly by 3% in investment income and others. Moving on to the new insurance products. This quarter, Rabbit Life issued new insurance products under [ UP3/1 ] and High protection 3/3, which are short-term investment integrated products where the insurer receives a 102% refund of the sum insured within a span of 3 years, whereas the high protection focuses on life insurance plan with an average starting premiums at THB 30 per day. Lastly, the [indiscernible] is an endowment insurance product offering life coverage up to 15 years with a 60% refund of the sum insured at the end of the maturity date. Additionally, this product also offers tax deductible capabilities of up to THB 100. Moving on to Rabbit Life's third quarter 2023 future outlook. There are 4 phases in mind, which includes the enhancement of its sales and products where Rabbit Life will revisit its product mix and expand its group insurance within the coming quarters. Investments, the yield curve will likely remain stable due to the improvement in equity performance brought on by overseas pressure. For operations and IT, Rabbit Life aims to implement new digital solutions where eClaim capabilities are possible, thereby improving their customers' quality of life. Lastly is the future collaborations within the Match segment to synergize with BTS Group's 3M platforms. And lastly, we expect better performances within the next quarter as we enter into the high seasonality of the insurance business. Moving on to the Hospitality business segment. For this quarter, the revenue was THB 326 million, declined by 68% year-over-year, mainly due to the disposal of our European hotel operations. In terms of operational keys in this quarter, the total keys was 1,834 keys, which decreased mainly from, as previously mentioned, the disposal of our European hotel operations and the disposal of our hotel management platform under Absolute Hotel Services. However, this was partially offset by the addition of the new Eastin Grand Phayathai under the Unicorn project. Moving on for the owned and leased hotels in Thailand are, as you can see, our occupancy rates decreased to 55% in this quarter compared to 71% last quarter but improved year-over-year, in line with the overall industry occupancy rates within Thailand at 67%, which improved from 42% year-over-year. For the owned and leased hotels in Europe, the occupancy rate slightly increased to 48% due to seasonality trends in line with the European markets with the ADR reaching up to THB 3,200 the highest it's ever been since the pandemic. Moving on to the Rental segment. This segment comprises of our office buildings located in London, such as the 33 Gracechurch, Novo Commercial Buildings, TST Tower and the recent addition of the Unicorn in Bangkok, Thailand. Apart from office buildings, we have commercial buildings under the rental business. And additionally, our own European hotels have been changed through operating leases from the partial disposal of our overseas hotels. And going forward, we can expect to receive a rental fee of around THB 660 million per year. The overall breakdown of revenue by office building amounted to THB 73 million this quarter. Additionally, the company has also recorded the Unicorn's performance for 1.5 months since its opening as part of its office rental segment, bringing the overall net floor area to 51,552 square meters with overall occupancy at 53%. Moving on to the residential segment. This quarter, there are 2 ready to move in condominium projects under the joint venture with SANSIRI, which are on sale, which includes KHUN By Yoo and The LINE Phahonyothin Park, whereas 2 more projects are currently in their development phases, which include [ The LINE 5 and The LINE Phantom ]. For this quarter total amounted to THB 1.7 billion. And in this year, the presales backlog amounted to THB 49 million comprised of KHUN By Yoo at THB 29 million and THB 20 billion from The LINE Phahonyothin Park. Lastly, once again, the company would like to showcase the opening of our latest development project under the Unicorn. The Unicorn, which officially opened on May 2023 and within just 1.5 months of opening the development project was astounding success. The Unicorn is a mix building comprising of 51 levels, consisting of retail, office spaces and a 5-star hotel under the Eastin Grand brand known as Eastin Grand Phayathai. The project features high-end workspaces and top-notch facilities with direct access to the BTS Phayathai station and Airport Rail Link. The 5-star Eastin Grand Phayathai both 31 floors that features a total of 494 rooms and suites with high-end facilities that include all-day dining from the market at 5, a wedding venue from the garden deck as well as a rooftop pool. Moving on to the retail. The retail floor features 6 levels where visitors can discover a range of local and international cuisines to savor quality food and drinks at the retail level. Lastly, the Unicorn offers Grade A office spaces that are customizable and suited for each company's requirements as well as seamlessly integrating the connectivity with the direct access to BTS Phayathai and the Airport Link. Meanwhile the project update for the Langham Custom House, which is positioned to be a luxurious 5-star [ hotel ] project is currently at 21% completion. And that concludes Rabbit Holdings second quarter 2023 earnings review.