Central Pattana & Robinson Dept Store

Central Pattana & Robinson Dept Store Plc (CPN)
 

Investment thesis: We visited Central Plaza Rama IX on its grand opening day yesterday. We left confident that the venue will soon become one of the leading shopping destinations in Bangkok and a major revenue generator for both CPN and ROBINS. The two firms are both good long-term growth plays, we believe. Our BUY ratings stand on CPN and ROBINS.
A CPN growth generator: Central Plaza Grand Rama IX will be a key CPN growth driver for the next several years. The complex is located at a prime location in Bangkok and has a total leasable area of 97K sq.m, which makes up 8.9% of CPN’s retail portfolio. Around 35k sq.m is leased to CRC group—ROBINS and five other anchors made upfront 30-year lump sum payments—but the remaining 62k sq.m makes the shopping mall the second-largest in CPN’s portfolio. The occupancy rate at opening was 90% and should reach 95% by YE12. The effective rental rate (inclusive of the 10% first-year promotional discount) for retail space is nearly Bt1,300/sq.m/month, ranking seventh in the portfolio, but we expect it to rise above the rates of Rama II and Bangna soon (see Figure 2). Moreover, we anticipate some rental income upside, given that 53% of short-term lease space is contracted under a revenue sharing basis (with minimum guarantees).
ROBINS gets an uplift: ROBINS’ Rama IX store is the successor to its Ratchada venue (whose land lease contract will expire in February 2013). The new flagship outlet has a sales area of 25k sq.m, the same area as its Ratchada outlet, but twice as big as its standard format. Management has upgraded its market positioning in order to capture B to A segement shoppers, up from C to B. We previously had some concerns about the repositioning, as most high-end shoppers in Bangkok aren’t very familiar with the Robinson brand and tend to perceive it as a low-end to mid-range department store. But having walked through every square inch of the location and having taken note of the brands and the merchandise mix, we are now confident that ROBINS can attract high-end shoppers and build market share. We expect this store to boost Robinson’s brand value among Bangkokians. And that should have a spillover effect on the popularity of other Robinsons outlets in the city.