Central Pattana

Central Pattana Plc (CPN)

- Launching new shopping centers in Thailand and overseas
CPN plans to open 20 new shopping centers in Thailand in next five years,
expecting income to grow by 15%p.a in 2015-2019. Currently, the
launching of five new shopping centers has been revealed: two new
shopping malls (Samui and Salaya) in 2014, two new shopping malls
(Rayong and Bang Yai) in 2015, and one new shopping mall (Nakhon
Ratchasima) in 2016. Moreover, CPN plans to launch new shopping centers
overseas. CPN has formed a joint venture with I-Berhad (Malaysia) to
develop I-City valued B5.8bn with total leasable space of 89,700 sq.m (CPN
holding 60% stake) which will be opened in 4Q16. CPN is also studying on
Vietnam and Indonesia's markets. CPN's investment budget is at B15-
16bn/year. The sale of Chiang Mai Airport shopping mall to CPNRF must be
done within 27 June 2014 (six months after the loan contract was signed on
27 December 2013). If the capital cannot be increased in time, a new REIT
fund might need to be established, but CPN would need to study more about
its tax and fee. Aside from capital from the sale of asset, CPN has
B10bn/year operating cash flow, which is enough to invest for another
couple years. With end-2013 net D/E ratio of 0.5x (compared to 1.0x in the
company's policy and 1.7x in the covenant) CPN is allowed to borrow.
- Sales from all shopping centers to boost FY2014 profit by 17%yoy
FY2014 profit is projected to grow strong, thanks to over 95% occupancy
rate and 5% growth in rental fee of existing malls (the company targeted at
5-6%). Three new shopping centers opened last year (Ubon Ratchathani,
Chiang Mai 2, and Hat Yai) would be able to fully generate income this year,
and 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); occupancy rate is
expected over 90% around the first days. Overall, FY2014 normalized profit
is projected to grow by 17%yoy to B6,923m.
- Buy for B0.55 FY2013 dividend
We derive FY2014 fair value (DCF, 8.2% WACC) at B55.00, implying 24%
upside. We reiterate to buy. 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 and the new
projects in Nakhon Ratchasima and Malaysia in 2016.