Central Pattana

Central Pattana Plc (CPN)
- 3Q14 profit grows as expected
3Q14 normalized profit was reported at B1,935m, growing 32.6%yoy. Rental
and service revenue grew by 19%yoy to B5,290m thanks to additional
200,000 sq.m leasable space from the four new shopping centers in Chiang
Mai and Hat Yai (4Q13), Samui (late 1Q14), and Salaya (mid-3Q14).
Moreover, it has been clear that CPN would gradually recognize income from
selling of leasehold rights in Central Plaza Chiangmai Airport to CPNRF for 30
years, thus resulting in B149m extraordinary income in 2Q14-3Q14. Gross
margin rose from 45.8% in 3Q13 to 47.5% in 3Q14, while SG&A/Sales
dropped to 13.9%. Share of profit from CPNRF climbed by 28%yoy to B217m.
End-3Q14 net gearing was 0.38x.
- Shopping centers business to remain strong in 4Q14
4Q14 profit is projected to prosper thanks to increasing income from the four
new shopping centers. Occupancy rate of existing shopping centers would
stay at 95%. In addition, average rental rate would be raised by 5% after
tenants renew three-year rental contracts in Central Plaza Ladprao (due in
3Q14) and Central Plaza Rama 9 (due in November). Though SG&A tends to
peak in the fourth quarter as a result of sales promotions, 4Q14 earnings are
expected to grow significantly from 4Q13 thanks to higher rental income. We
revise our FY2014 earnings forecast to reflect 30-year income from selling of
assets to CPNRF, which is projected at B243m in 2014 and B348m in 2015.
Under the new revision, CPN’s FY2014 net profit is estimated at B7.37bn,
growing 24.6%, not a significant change.
- BUY. 35.5% upside
FY2015 fair value (DCF, 8.2% WACC) of B64.00 implies 35.5% upside. We
recommend BUY.