Central Pattana

Central Pattana Plc (CPN)

CPN’s 3Q12 net profit is outstanding at B2,843.4m due to the recognition of
extraordinary profit of B1,602m from selling offices in Central World into the
fund of CPNGC. If the mentioned item isn’t included, the operating profit
would be B1,242m, growing by 2.2x YoY and 6% QoQ due to revenue from
operation at B4,255 or 43.8% YoY increase which comes from the followings
reasons: 1) the average rental rate of every shopping center has increased to
98% from 95% in 3Q11, 2) the average rental fee has increased by 13.3%
due to increased rental fee of Lad Phrao and UdonThani branches after an
opening of new phase last March, and 3) the decreased discount of rental fee
in Central World. Moreover, the revenue from food center business (4% of
total revenue) has risen by 13.5% YoY while the hotel business (4% of total
revenue) has thrived by 70.4% YoY along with the recovery of tourism. For
the gross margin, it has improved to 44.3% from 32.8%. In terms of
SG&A/sales, it has declined to 14% compared with 19% in the same period
of prior year. According to the effective tax rate that has dropped to 7.7%m
the company’s financial structure at end-3Q12 has net gearing dropping from
the previous quarter by 0.91x.


2 new shopping centers in 4Q12… 2012-13 profit revised up
The company’s operation in 4Q12 tends to improve constantly as the
shopping center business still has expanded due to increased revenue from
the existing shopping centers (especially Central World) including new
shopping centers in Chiangrai, Phitsanulok, and Rama 9 that had been
opened during 2011. Furthermore, the space of Udon Thani shopping center
(opened on in late of last March) has been expanded by 20,000 square
meters. In 4Q12, there are 2 new shopping centers in Surat Thani and
Lampang (opening on 11 October and in late-November, respectively).
Although there might be the pressure from increased depreciation of new
shopping centers in 4Q12 as the administrative expense goes higher than the
preceding quarter as a result of marketing event, the revenue and profit of
shopping centers and hotels are projected to compensated by benefits from
tourism season. Accordingly, we’re convinced that 4Q12 profit would stand at
B1bn which is higher than projected earlier. We revise up our 2012-13 profit
forecast, therefore 2012 operating profit would stand at B4,591m while the
net profit would be B6,193m, growing by 1.45x and 2x YoY respectively. In
2013, the operating profit is estimated at B5.2bn or 14% YoY increase.


“BUY”… 2013 fair value stands at B80.00 with 15% upside
2013 fair value, using 9.4% DCF-WACC, stands at B80.00 with 15% upside.
We recommend “BUY”. Nevertheless, we haven’t included positive factor that
would drive our forecast and the share price in the future which are as
follows: the plan of new shopping center opening by 3 branches/year since
2014 onward as the land has already been prepared (Suan Lum Night
Bazaar, large land of Thai Melon Polyester Co., Ltd with total area of 616 rais
which is located on Phaholyothin Road behind the red-line railway track), and
the plan of 30-year land rental with total area of 98 rais or 39,396 square
wahs on Kanchanapisek-Rattana Thibet Road next to BTS’s purple extension
line. Large shopping center is projected to be constructed with 75,000 square
metres of rental area excluded from the department store.