Central Pattana

Central Pattana Plc (CPN)

- 4Q13 net profit estimated at B1,316m, growing 19% yoy
We project 4Q13 net profit at B1,316m or the growth of 19% yoy. Income
from operation is estimated at B5,000m, expanding 12.2% yoy thanks to
increasing income from every shopping mall, especially two in Surat Thani
and Lampang (opened in 4Q12), one in Ubon Ratchathani (opened in 2Q13)
and recent two in Chiang Mai and Hat Yai (opened in November and
Decemebr 2013, respectively), which have added up total rental space by
17% yoy. Average occupancy rate has been high at 96%, while rental fee
has risen 3.2%yoy. Gross margin is projected to improve to 45.5% from
42.2%, while SG&A/sales is estimated at 19.8%. Overall, net profit margin
is expected at 26.3%, versus 24.9% in 4Q12.
- 18%yoy profit growth expected in 2014 from two new malls plus existing malls
We revise our FY2014 forecast to reflect the following issues. 1) A sale of
Chiang Mai Airport shopping mall to CPNRF has been delayed from 4Q13
due to unfavorable market situation, thus we have to include earnings of the
mall in our forecast again. 2) An opening of Central Rayong shopping center
has been postponed from 4Q14 to 1Q15 as the plan has been changed for a
bigger size of mall. 3) Average rental fee hike has been revised down from
7% to 5% to reflect the economic slowdown. Overall, new FY2014 net profit
forecast does not change significantly from the previous one; the net profit
is projected at B6,923m, growing 18% from FY2013 net profit forecast of
B5,583m. Three new shopping malls opened last year will be able to fully
generate income this year (Ubon Ratchathani, Chiang Mai 2, and Hat Yai),
while two new shopping malls with total leasable space of 56,500 sq.m. will
be opened this year (Samui in March and Salaya in July). At the same time,
occupancy rate of existing malls would remain high over 90% and average
rental fee would be hiked at least 5% a year.
- Share price has 42% upside. Buy
Using a DCF method with WACC of 8.2% and terminal growth rate slashed
from 5% to 4% to reflect political and economic risks, new 2014 fair value
of CPN is B55 (down from B68), still implying 42% upside from the current
share price that has declined 20% over the past three months until 2014
PER dropped to 25x from 30-40x. We reiterate to buy CPN for a long-term
investment. However, the forecast and fair value have still not included the
asset selling that might occur in 2014 and a new project in Malaysia in
2016.