Central Pattana

Share price to be driven by earnings result, project expansion, and asset sale BUY

Central Pattana Plc (CPN)

Q4 2012's profit estimated at B1,433m from extraordinary profit of B170m

4Q12's net profit is estimated at B1,433m, growing yoy but declining 50%qoq

because an extraordinary profit from selling of CentralWorld office building to

CPNCG which was booked at B1,602m in 3Q12 decreased to only B170m in this

quarter. Excluding the extraordinary item, norm profit would make a new high

at B1,263m, shifting notably 1.5x yoy and 2%qoq. Operating income would hit

a record at B4,645m, rising 40%yoy thanks to increasing income from every

shopping centers, especially Central Plaza Ladprao and 3 new shopping centers

(Chiang Rai, Phitsanulok, and Rama 9) opened in 2011, as well as a new phase

of Central Plaza Udornthani in late 1Q12 and 2 new shopping centers in 4Q12

(Suratthani and Lampang, with total leasable area of 52,000 sqm). Average

occupancy rate of all shopping centers has increased to 97percent from 94% in

4Q11, while average rental fee has shifted 12%yoy from a fee hike for Ladprao

and Udornthani centers after the new phase opening as well as a discount of

rental fee rate from CentralWorld. Gross margin is projected to improve to

44.7percent from 38%, while SG&A/sales is estimated at 16.4%. For FY2012, norm

profit is estimated at B4,741m, growing 1.5x yoy; combined with the

extraordinary profit from the asset sale at B1,771m, the net profit would be

B6,512m.

3 new + existing shopping centers to boost 2013's profit growth to 17%yoy

We revise up our profit forecast for FY2012-2013 by 5% on average in order to

reflect the extraordinary profit in 4Q12 and possibly better-than-expected gross

margin and profit sharing from the property fund. For 2013, we estimate norm

profit at B5.53bn, escalating 16.8%yoy as contributed by first full-year income

generating of Suratthani and Lampang centers opened last year as well as

income from 3 new shopping centers with total leasable area of 122,000 sqm

that will be opened this year (Ubon Ratchathani in 1Q13, Hat Yai in 4Q13, and

the second center in Chiang Mai in 4Q13). Furthermore, occupancy rate of

existing shopping centers is high at 90%, while the company will hike the rental

fee average by 7% a year. Our 2013's profit forecast has still not included a

plan to sell Chiang Mai Airport and Ram Inthra shopping centers worth of B8bn-

10bn to CPNRF in 2Q13-3Q13 and insurance compensation of B3.8bn for the

case filed since mid-December 2011 for which the trial court will announce the

ruling by 1Q13. If CPN wins the case and there is not further appealing, it will

be able to recognize compensation of around B4bn (including 7.5% interest a

year) by 2013.

Buy. Still not include new shopping centers in 2014, profit from asset sale, and insurance

New 2013's fair value, using DCF-WACC of 9.4%, is B100/share, implying 16%

upside. We confirm our BUY recommendation. Our forecast has still not

included a positive factor from 3 new shopping centers in 2014 and other 2 in

2015 as well as an extraordinary profit from the asset sale and the insurance

compensation.