Central Pattana

Central Pattana Plc (CPN)

- Normalized profit leaps 47%yoy in 4Q13 and 34% yoy in 2014, as expected
4Q13 net profit made the year's highest at B1,750m, growing 57.7%yoy.
Excluding B377.3m extraordinary profit from the reversal of impairment of
asset, 4Q13 normalized profit was B1,373m, growing 47%yoy as expected.
Income from operation rose by 19%yoy to B5,319m, mainly from every
shopping mall (91% of total income), including 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 December
2013, respectively). Average occupancy rate was as high as 96%, and
rental fee rose by 3.2%yoy. Income from food and drink business (5% of
total income) grew by 17%yoy thanks to the opening of new shopping
centers, and income from hotel business (5% of total income) rose by
19%yoy in tourism season. Gross margin improved from 42% in 4Q12 to
47%. Overall, FY2013 normalized profit was B5,915m, growing 34%yoy.
- FY2014 net profit to grow 17%yoy from new shopping centers and higher rental fee
CPN is likely to make a good progress in 2014. Two new shopping malls with
total leasable space of 56,500 sq.m. (Samui in March and Salaya in August)
will be opened this year. Also, income from the three new shopping malls
opened earlier (Ubon Ratchathani, Chiang Mai 2, and Hat Yai) will be booked
for a full year. Though the political turmoil and the Bangkok shutdown has
been threatening major shopping centers (e.g. Central World) since early-
2013, forcing CPN to give 30-40% rental discount to tenants, the negative
factor is expected to press CPN for only a short term. Conservatively, we
project average rental fee to rise by 5% (CPN aims at 6-7%). Overall,
FY2014 normalized profit is projected to grow by 17%yoy to B6,923m.
- Buy for long-term investment. FY2013 dividend at B0.55/share
We derive FY2014 fair value (DCF, 8.2% WACC) at B55.00, implying 35%
upside. Share price has dropped by over 10% during the recent three
months, lowering FY2014 P/E to 26x from previously 30-40x. We
recommend buying for long-term investment. FY2013 dividend is B0.55. XD
date is 6 May 2014, and dividend will be paid on 21 May. Our forecast and
fair value have not included the sale of Chiang Mai Airport shopping mall
that might occur in 1H14 if the market situation is favorable and the new
projects in Phuket, Nakhon Ratchasima and Malaysia in 2016.