Central Pattana

Central Pattana Plc (CPN)  

 

- 2Q15 profit meets projection, growing 9%yoy  

2Q15 net profit was B2,006m, growing 9%yoy, in line with projection. Normalized profit was B5,847m, rising 6%yoy. Rental income (92% of total income) grew 6%yoy from opening of three new shopping malls: Central Salaya (mid-3Q14), Central Rayong (May 2015) and CentralFestival Phuket 1 (acquired in June), which increased CPN’s total leasable space by 11% to 1.27 million sq.m. The average occupancy rate was 93% and the average rental rate was B1,533/sq.m./month. Income from the food and beverage business (4% of total income) grew 4.5%yoy from new shopping malls, while income from the hotel business (4% of total income) rose 2.5%yoy as the occupancy rate increased following the reviving tourism business. Average gross margin was 48.3%, versus 47.9% in the prior quarter, while SG&A/sales dropped to 14.7%; overall, net profit margin was 34%. In terms of financial structure, net gearing increased to 0.52x due to borrowing for investment in new shopping malls; the ratio is still safe though. 

- Two new shopping malls are a boost in 2H15  

We maintain our FY2015 profit forecast at B8.34bn or a growth of 15%yoy. 1H15 profit was still in line with the projection, accounting for 48% of our full-year forecast, and 2H15 profit would be boosted by two new shopping malls with total leasable space of 116,000 sq.m.: Central Westgate Bang Yai (opening August 28, 2015) and CentralFestival East Ville (opening October 2015). Moreover, CPN will recognize income from two shopping malls opened recently in 2Q15 for a full quarter and other existing shopping malls, especially Samui and Salaya. 

- Buy. Share price has 46% upside  

Since a majority of CPN’s income is from the rental business, it could still show steady growth amid the slowing economy. The share price has 46% upside from 2015 fair value (DCF, WACC of 8.2%) of B66.00. Buy.