Central Pattana

Central Pattana Plc (CPN)

3 new shopping centers/year, one of which is big project on area
of 616 rais

The business strategy that focuses on aggressive expansion has boosted the growth of revenue by 15%/year. This is done by continuous openings of new 3 branches/year, aiming to increase the number of shopping malls from 18 branches in 2011 to 30 branches in 2015, considered 1.54 million square meters in total for the rental area or an increase of average 9%/year. For the 12 new projects, 5 openings of them have been made clear as 2 branches will be opened in Suratthani in 4Q12 (there’s over 80% progress of area selling) and Lampang (70% of area has been sold). In 2013, there will be 3 openings in Ubon Ratchathani (opening in 1Q13), Hat Yai (opening in 3Q13)
and the second branch in Chingmai (opening in 4Q13). For the rest 7 projects that haven’t been made clear, there are 4 projects currently in the process of land negotiation. One of the mentioned projects is located on a large land from Thai Melon Polyester Public Company Limited with the total area at 616 rais (exceeding the area of Mega Bangna) which is on Phahon Yothin Rd.
behind the red line of BTS’s extension. CPN is projected to develop this area into a big shopping center as a central point for transportation from Bangkok to the North and Northeast. For the other 3 projects, there are in the process of land exploration. Due to the investment in developing the previous and new projects, the investment budget is assigned at B11-13bn/year. Half of
the capital comes from the working capital while the rest is from loaning and selling asset for the property fund. Recently, offices in Central World have been added into the fund of CPNGC worth of B4-4.5bn this September.

3Q12 tends to peak… 2012 norm profit revised up by 14%

3Q12 will be the most magnificent period of the year due to the most outstanding profit from selling offices in Central World. Preliminary, CPN (holding 25% stake in the fund) is projected to recognize extraordinary profit
by approx B14-17bn or B0.64-0.77/share. In terms of CPN’s shopping center operation, it’s still growing due to more revenue generating from the existing shopping centers especially Central World Lad Phrao, including ones in Chiangrai, Phitsanulok and Rama lX that were opened in 2011. Moreover, the area in Udon Thani shopping center (opened in late of last March) has been
expanded by 20,000 square meters. Furthermore, there will be 2 new branches to be opened in 4Q12. We revise up our forecast to reflect 1H12 profit beyond projection, considered 58% of FY2012 profit forecast. Due to the margin better than projected, decreased administrative expenses and a plan to expand Central World building by stopping operation since October
onward, the norm profit in 2012 rises by 14% to B4.43bn. Combined with extraordinary profit from selling asset (based on value of B4bn) by B1.4bn, 2012 net profit increases to B5.83bn.

“BUY”… 2012 new fair value revised up to B65.00 with 20% upside

Under the new forecast, 2012 fair value, using 9.4% DCF-WACC, soars to B65.00 (from B57) with 20% upside. We reiterate our recommendation “BUY”. However, we haven’t included the positive factors from new projects that will be opened in 2014-2015 because nothing has been announced
clearly.