Central Pattana

Central Pattana Plc (CPN) 

 

- 1Q15 normalized profit makes new high, growing 18%yoy

 

CPN posted 1Q15 net profit of B2,147m or the growth of 26%yoy. Excluding a reversal of allowance for impairment loss for land in Khon Kaen Province of B134m, normalized profit in the quarter was B2,015m, still growing 18%yoy and marking a quarterly peak. Rental and service income in 1Q15 was B5,271m, rising 10%yoy due to additional income from two new shopping malls (Koh Samui and Salaya) opened in March and August last year. Average occupancy rate dropped slightly from 95% in 4Q14 to 94% because of a six-month temporary shutdown of Central Pinklao for major renovation. However, an average rental rate increased 6.5%yoy; since CPN no longer gave a discount to lessees like last year, gross margin increased from 48.4% in 4Q14 to 50%. In addition, funding cost lowered B83m and shared profit from associated companies increased B31m from the prior quarter, resulting in normalized profit margin of as much as 35%. Net gearing decreased to 0.29x.

 

- To recognize income from four new malls since 2Q15

 

Continued growth is foreseen in the rest of the year from four new shopping malls opened since 2Q15 onwards: Central Rayong in May, Central Festival Phuket 1 in June, Central Westgate Bang Yai in July, and Central East Ville in October; total leasable areas of CPN will increase 190,000 sq.m from these new malls. Although occupancy rate will drop temporarily from the renovation of Central Pinklao, it will not significantly affect the company’s income for leasable areas of the mall are only 36,000 sq.m (most of which owned by CPNRF), while there is also increasing income from new projects. We maintain our forecast for 2015, estimating normalized profit at B8,257m or the growth of 14%yoy.

 

- Growth stock with healthy financial structure and high upside

 

FY2015 fair value (DCF, 8.2% WACC) is of B66.00. We reiterate BUY for CPN is a growth stock with strong profit growth and healthy financial structure.