Central Pattana

Central Pattana Plc (CPN)

New shopping centers targeted at 3 units/year, marching to 30 branches in 2013
CPN’s long-term business plan remains unchanged, aiming to open 3
shopping centers/year from 20 branches in 2012 to 30 branches in 2015,
considered 1.54 million square meters or an average increase of 10%/year.
In 2013, there’s a plan for 3 openings of new shopping centers in Ubon
Ratchathani in 2Q13, Hat Yai and Chianmai (2nd branch) in 4Q13. Moreover,
there’s a plan to open 4 new shopping centers in 2014 and 3 more in 2015
which hasn’t been revealed clearly; however, 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). Furthermore, there’s a 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. In terms of international
investment, the company has recently signed a contract with MOU and
I-Berhard to develop the shopping center in Malaysia. This project is a joint
venture which is projected to be clarified in early-2013. CPN has set the
investment budget for the development of existing and new projects at
around B15bn which comes from the working capital, loan, and selling assets
into the property fund. In addition, the company has a plan to sell Chiangmai
Airport and Ram Inthra shopping centers to CPNRF in 2013 and is considering
whether to sell Chaengwattana offices into CPNCG.

in 4Q12
The shopping center business is projected to grow continuously in 4Q12 due
to 2 openings of new shopping centers with 56,600 square meters of rental
area in Surat Thani opened on 11 October 2012 (during the opening, the
average rental rate was 93%) and Central Lampang on 30 November 2012
(the average rental rate is projected at 90%). Moreover, there is increased
revenue from the existing shopping centers especially Central World, Central
Lad Phrao and those in Chiangrai, Phitsanulok, and Rama 9 (which had been
opened during 2011); and Udon Thai shopping center that has been
expanded by 20,000 square meters on late-March 2012. Although there’re
expense from year-end promotion, the expense before opening a new project
and the depreciation of the mentioned 2 shopping centers, this is
compensated by increased revenue. Accordingly, 4Q12 profit is preliminarily
projected to stand at B1bn at least. FY2012 operating profit is projected at
B4,591m while net profit is projected at B6,193m, growing by 1.45x and 2x
YoY respectively. In 2013, the operating profit is projected at B5.2bn or 14%
YoY increase.

“BUY”… 2013 fair value is B80.00
2013 fair value, using 9.4% DCF-WACC, stands at B80.00 with 11% upside.
Nevertheless, we haven’t included the plan of new shopping centers in our
forecast that would be opened in 2014 onward, which would help boost the
profit and fair value. For the compensation, CPN has claimed for the court’s
consideration which is currently in the process of witness testimony,
projecting to take a long time to get the conclusion.