Rabbit Holdings Public Company Limited (RABBIT) Earnings Call Transcript

Good morning, and welcome to Rabbit Holdings Fiscal Year Meeting of 2023. Today, we're joined by a new face. Please allow me to introduce my new colleague, Mr. Kittipot, who will be joining the IR team. Before we commence, please make sure your microphones and cameras turned off, and please hold all questions at the end of the session. As usual, today, we're joined by the acting CEO and acting CFO of Rabbit Holdings, Ms. Soraya Satiangoset.

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And the IR team, [Foreign Language].

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So let's get started. Moving towards the fiscal year of 2023, the company recorded a total revenue of THB 5.3 billion, decreasing by 33% year-over-year, with the EBITDA of THB 1.3 billion, decreasing by 141% year-over-year. More details will be shared throughout the presentation. A few updates for our fiscal year 2023. It was a year for expansion of our Financial Services business, where we had invested into Prime Zone Asset Management, specializing in NPL and NPA management business. And lastly, with the new additions, which was completed on November 2023, is the inclusion of Metha Asset Management business, which is a private fund manager, a company that focuses on long-term investing value. In line with the company's business transformation, in the last few years, the company successfully divested its real estate assets totaling THB 6.4 billion, comprising of its European hotel portfolios and sales of its real estate joint venture projects. For 2025, the company will continue to pursue its divestment plans aiming to dispose of its remaining real estate projects forecasted at THB 10 billion. The company aims to dispose of its few remaining real estate portfolio by 2027, estimated in bringing net proceeds of THB 34 billion, which we will use to strengthen, expand and sustain the future growth of our Financial Services business. Moving to the financial performance for this year -- for 2023, sorry, the company recorded a total revenue of THB 5.3 billion, a decrease of 33% year-over-year, mainly due to lower income due to no gain on sales and subsidiaries from the disposal of our European hotel portfolio and residential joint venture projects. Lower revenue from hotel operations amounting to THB 1.1 billion year-over-year from the previously mentioned European hotel portfolio. However, the drop in revenue -- the drop in hotel revenue was offset by higher rental income due to the hotels in Europe shifting to a lease operating model. Lastly, the revenue drop due to lower insurance income of THB 603 million due to the decrease in premiums earned from single premiums. Towards your right-hand side, you can see the total revenue contribution divided by segment. Real estate accounted for 62%, financial services accounted for 20% and others accounted for 18%. Moving on to the financial performance analysis. From the waterfall chart, this is a short analysis on the performance of our fiscal year 2023. Operating revenue was THB 4 billion, decreasing by 20% -- 27% year-over-year, as mentioned. This was primarily due to the lower revenue from our hotel operations as we disposed off our European hotel portfolio, but offset by higher rental income due to the shift of operating lease model that grew by 92% year-over-year or THB 1.1 billion. Moving downwards, the company recorded a share of loss of THB 1.1 billion, mainly contributed by SINGER of THB 795 million and others of THB 325 million. In addition to this year, the company registered THB 3.5 billion in impairments and write-offs, maybe contributed from SINGER at the value of THB 2.4 billion. However, on the plus side, the company recorded THB 831 million in other income, mainly from interest income and others of THB 693 million. For the total net loss of 2023, the company reported a net loss of THB 4.3 billion. However, if we excluded one-off items and share of loss, you see that the company will record a net profit of THB 266 billion. Moving on to the summary of impairment costs for the year 2023. Firstly, let's preface on the triggers of the impairment cost. Impairment costs occurs when the carrying amount of an asset on the company's balance sheet exceeds its recoverable amount, which is higher of its fair value, less cost to sell in its value in use. Here's a snapshot of the total impairment cost and its breakdown for 2023. As indicated, the majority is from SINGER. For the second quarter of 2023, we recorded impairment cost of THB 1.5 billion. And by the end of the year, the total impairment cost of SINGER totaled at THB 2.4 billion, accounting for 68% of the total impairment cost for 2023, whereas others accounted for 21% of the total impairment costs with a grand total at THB 3.5 billion. Moving on to the financial position and cash flow. The balance sheet for 2023 shows the total asset at THB 62 billion, decreasing by 9% from December last year. The decrease was mainly from investments in associates from the allowance of impairment loss and long-term loans to related parties and interest receivables. Moving on to the cash flow as of the year 2023, the ending cash was THB 1.6 billion, with net cash from operating activities of THB 494 million, net cash used from investing activities accounted for THB 511 million. And lastly, net cash from financing activities was THB 203 million, mainly attributed to loans from financial institutions. Moving on to the CapEx for 2023, you would see that the CapEx -- the company recorded the CapEx and property investments of THB 3.4 billion for purchases in long-term financial assets, other investments and investment properties. Lastly, for the debt structure for 2023, the company has a total outstanding debt at THB 18 billion, and on the right-hand side displays the breakdown by currency, which Thai Baht is equivalent to 78% and euros for 22%. If you look down, the total interest-bearing debt was THB 19 billion, and the IBD ratio is 0.57x at the end of 2023. Let's move on to the operational updates. Firstly, for our Financial Services business, this year, Rabbit Life increased 2 ranks up to reach #6 in market share in terms of sale via digital platforms, and it remains at #16 in market share in terms of total premiums. Again, I'd like to reiterate Rabbit Life's -- at the start of 2023's goal. Rabbit Life has set a new target of its total gross premium targeting at THB 2.5 billion to THB 2.8 billion, along with the expansion of 1000 agents by 2023. By the year end of 2023, Rabbit Life's gross premium target was in line with its goal and managed to recruit a total of 1,000 agents. For revenue breakdown in the insurance sector, the insurance segment brought in THB 994 million, and the breakdown consisted of premiums earned amounting to $716 million, invested income at THB 278 million. A year-over-year comparison below exhibits a breakdown compared by premium types. As you can see, the first year of premiums increased by 61%, renewal premiums increased by 16%. However, single premiums dropped by 96%. This is due to the reclassification by TFRS 9. A breakdown by channels on the right hand side shows that Rabbit Life's agents increased the number of premiums earned by 100%, which was due to Rabbit Life's successful agent recruitment. And moving on to upper right hand side, a breakdown comparison for the investment income grew by 10% if you can compare to the last year. Moving on to some of Rabbit Life's insurance product showcases. For 2023, the top insurance products for Rabbit Life were UP 3/1 and JAI JAI 15/6. Just a short intro about these products, UP 3/1 is a short-term investment integrated product where the insured receive 103% refund of the sum insured within a span of 3 years. And in addition, the insurer also receives a life coverage of 3 years maximum, whereas the JAI JAI 15/6 is an endowment insurance product offering life insurance with coverage of 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 100,000. On your right-hand side, in line with leveraging of BTS Group's affiliate network, this is one of the synergy showcases based on BTS Group's 3M concept. Rabbit Life has announced a subscription package under the Xtreme Savings Pack available to Rabbit Rewards app users only where subscribers are entitled to receive a cash coupon of THB 1,000 to be used to purchase Rabbit Life's HERO 10/5 insurance package. A short intro about the HERO 10/5, it's the insurance package, which offers long-term investment where the insured receives 20% refund of the sum insured for the first 5 years with a life insurance coverage of up to 10 years. Lastly, moving on to Rabbit Life's first quarter of 2024 outlook. There are 4 phases in line. The first one is the Sales & products, Rabbit Life aims to focus more on the wealth and broker channels while keeping up with the early year momentum. The second one is Investments. Rabbit Life will redeploy its investments to make informed decisions to focus within the REIT and dividend-based strategies. Third one is the Operations & IT, where Rabbit Life aims to implement new digitization solutions to ensure efficient case tracking and better team management. And lastly, Rabbit Life has -- also has plans to launch more subscription proposals leveraging our BTS Group's affiliate networks. Moving to another part of our financial service is the NPL and NPA management overview. Rabbit Holdings through its wholly owned subsidiary, RBH Ventures, announced its intention to invest 70.8% in Prime Zone Asset Management, which is an NPL and NPA management business. Prime Zone Asset Management consists of a management team with expertise within the AMC business and started securing NPLs, specializing in personal loan management, debt restructuring and adding value to assets acquired or better known as NPAs. The investment rationale for Prime Zone or the NPL and NPA business is as part of the company's expansion into financial services business, Rabbit Holdings invested into Prime Zone's, as it sees ample opportunity within the NPL business since there is potential growth and opportune timing once the loan support from Bank of Thailand has ended at [indiscernible]. It's also estimated that in 2022, the NPL in the system is THB 500 billion, and the amount of NPL Flow release was around THB 70 billion to THB 80 billion. However, in the future, if we assume the loan support from THB 3 trillion from the BoT ends, the NPL and the system would be increased by estimated 30% to 60% to THB 800 billion, in turn releasing more NPL flows of around THB 200 billion to THB 220 billion out for auctions. In addition to this, after the acquisition of Prime Zone in July 2023, it's -- we saw Prime Zone's NPL and NPA portfolio grew to 123%. Moving on to the performance side. In -- like I said before, in 2023, the company recognized revenue from NPL and NPA management business of THB 483 million after consolidating its performances since July 2023. Prime Zone also joined securing of NPL portfolios and successfully acquired NPLs with a principal balance of THB 483 million. Prime Zone's total loan portfolio stands at THB 1.5 billion as of day with total collateral assets of THB 1.4 billion at the total acquisition cost of THB 876 million. Furthermore, Prime Zone recorded total cash collections from its NPL portfolio in the amount of THB 44 million this year. On your right-hand side, you'll see the non-performing asset portfolio. And as of December 2023, Prime Zone added 2 more assets totaling -- added 2 more NPA to its portfolio, which is totaling around 22 items with each asset averaging at THB 4 million. Moving on to our next financial service business is the asset management business under Metha. In 2023, as part of Rabbit Holdings' expansion into financial service business, Rabbit Holdings announced its intention to invest 50% in Metha Asset Management Company, a private fund management company. This transaction was recently completed in November 2023, and the investment rationale for this acquisition was primarily from lucrative entry point for Rabbit Holdings to strengthen its financial business towards asset management business, leveraging from Metha's expertise. The second one is there is favorable opportunity based on this year's government legislation of mandating the establishment of mandatory provident funds, allowing Metha to capture this opportunity as part of its service offerings. Lastly, Metha will also be backed by strong management from both Rabbit Holdings and BTS Group's affiliate networks, which will be used to solidify its portfolio. Moving on to the hotel segment of the company. For this year, the hotel segment brought in THB 2 billion, declining by 37% year-over-year, mainly due to the disposal of our European hotel operations and disposal of our hotel management platform, Absolute Hotel Services or AHS. In terms of operational keys in this quarter, the total keys was up 1,913 keys, decreasing mainly from the disposal of our European portfolio, like I mentioned disposal of our hotel management platform under AHS. However, this was offset by the opening of the Eastin Grand Phayathai, which added keys -- further additional keys to our hotel operations. For the revenue breakdown for the owned and leased hotels in Thailand, our occupancy rate increased to 72% in this year compared to 53% last year. This greatly improved -- the industry occupancy rate increased due to the recovery of the tourism sector in line with the industry occupancy rates within Thailand of 74%. For owned and leased hotels in Europe, the occupancy rate slightly decreased to 46% compared to 48% last year. This is primarily due to the off-season peak within Europe. Moving on to the rental segment. This segment comprises of our office buildings located in London, such as the 33 Gracechurch. We also have offices in Thailand as well under Noble Commercial Building, TST Tower and the addition of The Unicorn. The overall breakdown of revenue by office building amounted to THB 84 million in this year. And right below, the company recorded the Unicorn's performance as part of its office rental bringing the overall net rental floor to 51,000 square meters with overall occupancy at 56%. For the residential segment, we still have the joint venture projects with SANSIRI. This year in 2023, there are 2 ready-to-move-in condominium projects with the joint venture projects with SANSIRI, which are currently on sale, which includes The Line Vibe and The Line Phahonyothin Park, whereas there's still one more project that is currently in their development phases, which is The Line Sathorn. The total sales -- presales backlog amounted to THB 2.4 billion from the sold condominium projects. And for 2023, the presales backlog amounted to THB 203 million solely from KHUN By YOO. Now, I'd like to pass on to my colleague, who will take you through the company's other projects for 2023.

Thank you, Mr. Kisada, and good morning, everybody. Once again, the company would like to showcase the opening of its latest development project. The Unicorn initially opened on May 2023. It's a mixed-use 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 the Airport Rail Link. 5-star Eastin Grand Phayathai hosts 31 floors with the features of total of 494 room and suites with high-end facilities that include all-day dining from The Market@5, wedding venue from the Garden Deck as well as a rooftop pool. By December 2023, the hotel recorded an impressive 81% occupancy rate, the highest it's ever been since opening. Moving on to the retail features, 6 levels, where visitor can discover a range of local and international cuisines through savoring quality food and drinks at the retail level. Lastly, The Unicorn offers Grade-A office spaces that's customizable and suited for each company's requirements as well as seamlessly integrating the connectivity with direct access to the BTS Phayathai and the Airport Rail Link. Meanwhile, in the project updates for The Langham Custom House, this is positioned to be a luxurious 5-star hotel. The project continued to progress well at 21% completion. For this year, we had a new project under The Residences 38, an upscale residential project located in Bangkok's Thonglor district, Sukhumvit 38. This building consists of 36 floors, which is a combination of service apartments, residential from condominium and food and beverage stores with the expected period of completion by 2025. The project highlights, Ananda Development has been accorded as developer to oversee the construction, development and sales pending of the project. The project consists of 36 floors, as previously mentioned. First lower floors are under facilities, amenities, including a gym and swimming pool. Second, L12, for [ food & beverage retail ], which will be operated and managed by Rabbit Holdings. Third, starting from Level 12 to 23 will be the service apartments, which will be operated and managed by the ASCOTT under the name La Clef Bangkok, by The Crest Collection, marking debut of The Crest Collection in Thailand. And fourth, from Level 24 to 36 onwards will be the residential condominium under the name The Residences 38. There is a total of 171 units, first 115 units amongst them being serviced apartments and second 56 units within condominium. The total project cost is THB 4.9 billion with already THB 2.5 billion invested and additional THB 2.4 billion remaining. Source of funds, a combination of bank loans, shareholder loans and cash cycle. The project timeline below shows that we have started the redevelopment of the project since the second quarter of 2023. And by the fourth quarter this year, there will be more sales and marketing announcement of the project. Lastly, the services apartment opening is expected to launch by the first quarter of 2025. I guess quick look, sneak peek look -- sorry, yes, a quick sneak peek look on what the inside projects look like. First, hallway entrance of the project for both service and residential condominium units. Second, lobby area perspective, including linens from Indonesia and Thailand. Third, residential condominium concept, blending a mix of French and Asia together. And fourth, whereas the serviced residential comes in, brings linens from Indonesia and Thailand under The Crest Collection. This concludes the analyst presentation. We can move to Q&A session now. Thank you.