Central Pattana

Central Pattana Plc
Event
- We maintain our Outperform rating on Central Pattana (CPN) and DCF-based TP of Bt62. We raise our EPS estimates by 0-3% for 2013-15 to factor in its newly announced mall and additional retail space from an asset-enhancement plan. After the recent share price pullback, we see its current valuation as less expansive. Future catalysts are still its continuing mall expansion, strong retail rental growth, and upcoming asset monetisation.
Impact
- Growing net leasable area. CPN’s retail net leasable area (NLA) reached 1.15m sqm at end-2Q13, up 20% from 2010. The company plans to increase its NLA by 37% to 1.75m sqm by 2016. Total number of malls is expected to reach 35 by 2016. By doing so, CPN plans to open at least three new malls a year with a combined space of 100k sqm per year.
- Six new malls disclosed for 4Q13 to 2016. CPN will open two new provincial malls in Chiang Mai and Hatyai in 4Q13, followed by three malls in Samui, Salaya and Rayong in 2014, and CentralWest Gate Bangyai in 2015. As of 2Q13, its same-store rental growth (excluding new malls) was strong at 6.5% with a 97% average occupancy rate. 
- Additional growth via asset enhancement. CPN is also keen to increase its existing asset value by expanding total leasable space, renovating, and/or remerchandising its existing properties to attract higher traffic and draw higher quality vendors. Two major assets under this scheme will be Groove@CentralWorld with an additional NLA of 7.5k sqm and the CentralPlaza Bangna renovation with new NLA of 4k sqm.
- Upside from asset monetisation. The process of divesting Central Airport Chiangmai to a property fund is still underway. The fund size is expected at not more than Bt12.6bn. The transaction is likely to be concluded in 4Q13. We have not factored this into our current earnings projections for CPN.
Earnings and target price revision
- We raise our EPS estimates 0-3% for 2013-15 to factor in the newly announced mall in Rayong and asset-enhancement plan. TP is unchanged.
Price catalyst
- 12-month price target: Bt62.00 based on a DCF methodology.
- Catalyst: New mall expansion, rising rental growth and asset divestment.
Action and recommendation
- CPN is trading at 20.5x 2014E PER, vs its LT mean of 27.8x. Given the prospect of strong earnings growth, high quality assets and a dominant market