Central Pattana

Profit to peak in 3Q 2014 BUY

Central Pattana Plc (CPN)

- Profit to peak in 3Q14 from sale of asset

3Q14 normalized profit is estimated at B1,830m, growing 25%yoy. Four new

shopping centers with 200,600 sq.m leasable space in Chiang Mai and Hat Yai

(4Q13), Samui (late 1Q14), and Salaya (mid-3Q14) were opened, increasing

CPN's leasable space by 18%. Average occupancy rate is projected at 95%,

and average rental rate has risen by 1%yoy to B1,526/sq.m./month (excluding

new shopping centers, average rental rate has risen by 4-5%yoy). Thus,

income from rent and service is estimated to grow by 17%yoy and gross

margin is projected to rise from 46% in 3Q13 to 48% in 3Q14, while

SG&A/Sales is expected at 15.5%. Extraordinary income from sale of asset in

2Q14 is expected to be recognized in 3Q14; it is still unclear whether it would

be booked once for the whole amount at B4.5bn or gradually booked at

B150m/year for 30 years. Still, 3Q14 net profit is projected to make the peak

of 2014 anyway.

- 4Q14 profit to prosper from shopping centers, higher rental income

4Q14 profit is projected to prosper thanks to increasing income from the four

new shopping centers. Occupancy rate of existing shopping malls would stay at

95%. In addition, share of profit from tenants is projected to increase thanks to

higher sales in shopping season at the end of the year. Average rental rate

would be raised by 5% after tenants renew three-year rental contracts in

Central Plaza Ladprao (due in 3Q14) and Central Plaza Rama 9 (due in

November). We maintain FY2014 earnings forecast; normalized profit is

estimated at B7.3bn and net profit (including income from sale of asset) is

projected at B7.45bn in 2014, growing 24% and 19%yoy, respectively.

- BUY. 23% upside

FY2014 fair value (DCF, 8.2% WACC) of B60.00 implies 23% upside. We

recommend BUY.