Central Pattana

Central Pattana Plc (CPN)

 

- 4Q14 normalized profit grows 28%yoy  

CPN's 4Q14 net profit was B1,820.5m, growing 4%yoy. Excluding extraordinary income of B66.3m from reversals of provisions for impairments of investment and B377m from reversals of provisions for impairments of assets, 4Q14 normalized profit was B1,754m, jumping 28%yoy. Rental and service revenue grew by 8.5%yoy to B5,239m thanks to additional 137,000 sq.m leasable space from the three new shopping centers in Hat Yai (opened on December 14, 2013), Samui (late 1Q14), and Salaya (mid-3Q14). Occupancy rate stayed at 96%, but average rental rate slipped by 1.1%yoy because CPN gave 3% discount for tenants affected by the political unrest earlier last year. Gross margin rose from 47% in 4Q13 to 48% in 4Q14, and SG&A/Sales dropped to 21.4%. Interest expenses decreased by B64m, while share of profit from associates rose B40m from 4Q13. Overall, CPN's FY2014 net profit was B7,307m (up 16%yoy, as expected) and normalized profit was B7,241m (growing 22.4%yoy). 

- Three new shopping centers, new rental rate to boost 2015 profit 

CPN's FY2015 profit is anticipated to grow since Central Rayong (May), Central Westgate Bang Yai (July), and Central East Ville Liab Tang Duan Ramindra (October) with 142,000 sq.m leasable space will be opened and revenue from the two shopping centers opened in 2014 (Samui and Salaya) will be booked for a full year. Rental rate would rise by 4-5% after old rental contracts (Surat Thani and Lampang) end in 4Q15. In addition, long-term rental contracts of total 30,000 sq.m leasable space will end this year, so CPN will use the space for short-term rental contracts at the latest rental rate. Rental contracts of 20,000 sq.m space at Central Pinklao at the rental rate of B300-400/sq.m will end in March, so CPN will initially raise the rental rate to B2,000/sq.m/month, and then increase the rate by another 7-10% after the renovation of Central Pinklao is complete in 4Q15. Overall, FY2015 profit is estimated to grow by 14%yoy to B8,257m. 

- FY2114 dividend is B0.65/share   

CPN will pay FY2114 dividend at B0.65/share; XD date is April 30, and the dividend will be paid on May 20. FY2015 fair value (DCF, 8.2% WACC) is B64.00, implying 43% upside. We reiterate BUY.