Central Pattana

Central Pattana Plc (CPN)

- 1Q14 normalized profit to grow qoq
  1Q14 net profit is projected at B1.7bn, falling 2.8%qoq; B377.3m
extraordinary profit from the reversal of impairment of asset was booked in
4Q13. Excluding extraordinary items, 1Q14 normalized profit is expected to
grow by 24%qoq. Selling and administrative expense is projected to drop
from 4Q13 (sales promotion activities were held in late-2013) thus lowering
SG&A/Sales from 22.6% in 4Q13 to 17% in 1Q14. Income from operation is
likely to rise by 2%yoy to B5,427m, as income from two new shopping malls
in Chiang Mai (opened in November) and Hat Yai (opened in December)
have been booked for a full quarter. Average occupancy rate has been as
high as 95%, while average rental fee has dropped by 1.7%qoq to
B1,484/sq.m./month (CPN has given 20% rental discount to tenants for one
month and a half during the protest rally). Gross margin is expected at
47.2%, close to 4Q13.
- New shopping malls and profit from asset sale to boost 2Q14 profit
2Q14 net profit is expected to continue growing qoq thanks to strong
shopping mall business. Occupancy rate would to stay at 95%. Income from
a new shopping mall in Samui (opened in late-March with total leasable
space of 56,500 sq.m) would be booked for a full quarter. Also, rental fee
would improve after CPN’s rental discount to tenants for Central World has
dropped from 20% in 1Q14 to below 10% in 2Q14. CPN would recognize
B4-4.5bn extraordinary profit after Chiang Mai Airport shopping mall valued
B10bn has been sold to CPNRF in late-April. However, CPN has currently
been discussing with the auditor and the Securities and Exchange
Commission (SEC) whether the extraordinary profit should be booked once
and for all in 2Q14 or recognized little by little for 30 years (correspondent
with the rental contract). We have not included the extraordinary profit in
our earnings forecast yet. Overall, FY2014 net profit is projected to grow by
17%yoy to B6,923m.
- Buy. 23% upside
We derive FY2014 fair value (DCF, 8.2% WACC) at B55.00, implying 23%
upside. We recommend buying for long-term investment, as CPN would
benefit from the opening of new shopping malls. Central Plaza Chiangrai,
Central Plaza Chiang Mai Airport, Central Festival Chiangmai and Central
Plaza Lampang were not damaged from the earthquake in the northern area
on May 5. Central Plaza Chiangrai was closed on May 6 for the safety of the
related stakeholders, while other shopping malls were opened as usual.