Central Pattana

Central Pattana Plc (CPN) 

 

- Income to grow 15% p.a 

The five-year plan is targeted to boost CPN's income growth by 15%p.a. Income from current shopping centers is expected to rise by 5% as CPN will raise it rental rates and focus more on common areas and convention halls that generate higher income. The company also plans to develop new projects both in Thailand and overseas. CPN has eight new projects which have been revealed and are now in the process of construction; four of which will be opened in 2015 (Central Rayong, Central Westgate Bang Yai, Central East Ville, and CentralFestival Phuket 1), two will be opened in 2016 (Central Nakhonratchasima and Central Nakhon Si Thammarat), and another two will be opened in 2017 (CentralFestival Phuket 2 and a shopping mall in Malaysia). In addition, the company has planned to renovate its two existing shopping malls (Central Pinklao and Central Bangna) to increase the rental rate and attract more traffic. The three-year business plan requires total budget of around B70bn, which will come from operating cash flow, bonds, and loans (end-2014 net gearing was 0.3x). 

- Strong profit in 2015 

CPN's FY2015 net profit is estimated at B8.34bn, leaping 15%yoy. Income from two shopping centers opened in 2014 (Samui and Salaya) will be recognized for a full year and income from four new shopping centers (see next page) will be booked for the first year in 2015. In addition, rental rate would rise by 4-5% after old rental contracts end. Long-term rental contracts of total 20,000-30,000 sq.m leasable space will be converted to short-term rental contracts at the latest rental rate. Rental contracts of leasable space at Central Pinklao at the long-term rental rate of B300-400/sq.m ended in March, so CPN will initially raise the rental rate to B2,000/sq.m/month, and then increase the rate by another 7-10% after the renovation of Central Pinklao is complete in October-November 2015. 

- Growth stock with high upside 

CPN is a growth stock with strong income and profit. FY2015 fair value of B66.00 (DCF, 8.2% WACC) implies 50%, and its P/E ratio has dropped from 30-40x to 23.7x. We reiterate BUY.