Central Pattana

Central Pattana Plc (CPN) 

 

What’s news

CPN kicks off this year with the launches of three condo projects next to its shopping malls in Chiang Mai, Khon Kaen and Rayong. The project value is around Bt0.8-1bn each. The condo scheme in Chiang Mai has started pre-sales since last week and its current take up rate is slightly above 50%. Pre-sales of the condo in Khon Kaen starts this week while that of Rayong will kick off next week. The condos target the mid-to-high-income demographic, with sales per sqm of Bt60,000-70,000. Construction will start in 2Q16 and the transfer will take place in 2Q18.

Our thoughts

The decent take-up rate for its condo scheme in Chiang Mai alleviates our concerns over condo development in provincial areas. The Khon Kaen and Rayong projects should receive good responses as well. Given that Khon Kaen is the educational hub for the Northeastern region, the condo project there targets mainly faculty and students. For Rayong, which is the largest industrial zone in Thailand, we have little concern as there should be demand from workers and expatriates at nearby industrial parks.

However, impact from condo projects to CPN’s earnings should be minimal. We expect the three condos will account for only 2-3% of FY18 profit. Even without profit from condos, the developer’s earnings are expected to grow at three-year CAGR of 20%, FY16-18. With its current cheap valuation of 20.6x FY16, versus long-term average of 26.4x, we maintain our BUY call on CPN with a YE16 target price of Bt63.50.