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Central Pattana

Long-term growth from new shopping centers BUY

Central Pattana Plc (CPN)

- Launching new shopping centers in Thailand and overseas

CPN plans to open 20 new shopping centers in Thailand in next five years,

expecting income to grow by 15%p.a in 2015-2019. Currently, the

launching of five new shopping centers has been revealed: two new

shopping malls (Samui and Salaya) in 2014, two new shopping malls

(Rayong and Bang Yai) in 2015, and one new shopping mall (Nakhon

Ratchasima) in 2016. Moreover, CPN plans to launch new shopping centers

overseas. CPN has formed a joint venture with I-Berhad (Malaysia) to

develop I-City valued B5.8bn with total leasable space of 89,700 sq.m (CPN

holding 60percent stake) which will be opened in 4Q16. CPN is also studying on

Vietnam and Indonesia’s markets. CPN’s investment budget is at B15-

16bn/year. The sale of Chiang Mai Airport shopping mall to CPNRF must be

done within 27 June 2014 (six months after the loan contract was signed on

27 December 2013). If the capital cannot be increased in time, a new REIT

fund might need to be established, but CPN would need to study more about

its tax and fee. Aside from capital from the sale of asset, CPN has

B10bn/year operating cash flow, which is enough to invest for another

couple years. With end-2013 net D/E ratio of 0.5x (compared to 1.0x in the

company’s policy and 1.7x in the covenant) CPN is allowed to borrow.

- Sales from all shopping centers to boost FY2014 profit by 17%yoy

FY2014 profit is projected to grow strong, thanks to over 95% occupancy

rate and 5% growth in rental fee of existing malls (the company targeted at

5-6%). Three new shopping centers opened last year (Ubon Ratchathani,

Chiang Mai 2, and Hat Yai) would be able to fully generate income this year,

and two new shopping malls with total leasable space of 56,500 sq.m. will

be opened this year (Samui in March and Salaya in July); occupancy rate is

expected over 90% around the first days. Overall, FY2014 normalized profit

is projected to grow by 17%yoy to B6,923m.

- Buy for B0.55 FY2013 dividend

We derive FY2014 fair value (DCF, 8.2% WACC) at B55.00, implying 24%

upside. We reiterate to buy. FY2013 dividend is B0.55. XD date is 6 May

2014, and dividend will be paid on 21 May. Our forecast and fair value have

not included the sale of Chiang Mai Airport shopping mall and the new

projects in Nakhon Ratchasima and Malaysia in 2016.


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