Central Pattana

Buy – Upgrade form Hold; Bt34.50

Price Target : Bt40.00 (Prev: Bt38.00)

·      Three properties - Ladprao, Ramindra, and Pinklao - temporarily closed due to floods; business as usual at 14 other properties

·      Solid growth outlook supported by re-opening of Central Ladprao and opening of new malls

·      Offering 16% upside to our revised Bt40 TP based on DCF, upgrade to BUY from Hold

Expecting strong 3Q11 result. Its result due out on 14 Nov is expected to improve sharply YoY and QoQ. This would be due to (i) the re-opening of Central Ladprao on 28 Aug, which had been closed for major renovation for six months and re-opened at higher rental rates, and (ii) smaller rental discount at Central World of 15%, from 30% in 2Q11.

3 properties temporarily closed. Since most of Central Pinklao had been injected into CPNRF, the impact on CPN will be mild. The rental area at Central Ladprao and Ramindra represent about 7% of CPN’s total leasable area. Nonetheless, the loss of revenue from these two projects will be partially offset by higher revenues from its upcountry branches e.g. Pattaya, Chiangmai, Khon Kaen, and Chiangrai, as many Bangkokians have moved to these areas to avoid being caught by heavy floods in Bangkok. Meanwhile, Central Rama 9 will be opened on 14 Dec 2011, Surat Thani in Jun 2012, and CentralFestival Chiangmai in 2013.

Upgrade to BUY from Hold. CPN’s share price has come off 19% from its peak in September. The stock now offers 16% upside to our revised Bt40 target price that is based on DCF metric, plus 1.5% dividend yield.