Central Pattana

Central Pattana Plc (CPN)

30-year contract for almost 100 rais in Bang Yai worth of B5bn
CPN has revealed to make a 30-year land lease contract with Vantage
Ground Company Limited (100% stake held both directly and indirectly by
the Chirathivats) to rent 98 rais 3 ngans 96.1 square wahs of land which is
located at Kanchanapisek-Rattana Thibet junction (where the last station of
BTS’s purple line extension would be). The cost of this agreement stands at
B5,098.68m in total, divided into B654.96m of upfront fee and B4,443.72m
of annual rental fee since 2013-2042 (consider B1.8bn of the current value).
The investment budget would be from the working capital, loan, and selling
assets into the property fund. Preliminary, the company has planned to sell
Chiangmai Airport and Ram Inthra shopping centers to CPNRF in 2013. The
abovementioned land rental would be brought into consideration in the
shareholder meeting on 18 January 2013.


Prepare to develop big shopping center with 75,000 sq m area, opening in 2015
CPN has stated to develop the mention high-potential land into mixed-use
property project. The first phase would be developed into 3-floor big
shopping mall on 60-rais land with the gross floor area including the parking
lot of 333,000 square meters, considered CPN’s total leasable area of 75,000
square meters (not including the area of 50,000 square meters of Central
shopping mall that is responsible for rental and construction). At present, the
total invest budget is B6.88bn (the construction cost is B5bn while the rest is
for the leasing cost which is considered the current value from 8.8% discount
rate). The construction of mentioned project would begin in February 2013,
taking 26 months to complete. The operation is projected to start in 2Q15.
From our assumption, the occupancy rate would stand at 90% in the first
year of the opening and would increase to 95% in the following year. The
average rental rate would be assumed at B1,400/sqm/month by giving 10%
discount for the first year, decreasing to 5% in the second year before going
zero in the third year. Afterward, the average rental fee would be revised up
by 5% per year. Moreover, we’ve revised up our average rental rate growth
of existing shopping centers from 3% to 7% due to long-lease contract that
would gradually expire in each year from 2013 to 2021 in the total amount of
230,000 square meters or 24% of the rental area under CPN’s management.
Accordingly, this would change into short-term leasing contract which would
be based on the market rate; therefore, 2013-2018 profit would increase
from our projection by approx 9%.


“BUY”… new 2013 fair value at B90.00
Under the new forecast including Bang Yai shopping center, new 2013 fair
value, using 9.4% DCF-WACC, has increased to B90 with 12.5% upside. We
reiterate our recommendation of “BUY” for CPN. Nevertheless, we haven’t
included 4 new shopping centers opening in 2014 and 2 new shopping
centers opening in 2015 in our forecast, since the plan hasn’t been
announced clearly. In addition, the plan to sell assets into the fund also isn’t
included in our forecast.