Comprehensive Analysis of Central Pattana Public Company Limited (CPN)
Broker Name: UOB Kay Hian
Date of Report: Friday, 15 November 2024
Company Overview
Central Pattana Public Company Limited (CPN) is Thailand’s largest retail property developer. The company focuses on developing retail properties like shopping malls in major cities for rental, as well as other mall-related businesses like food & beverage (F&B), hotels, and residential properties.
Stock Data
- GICS sector: Real Estate
- Bloomberg ticker: CPN TB
- Shares issued (m): 4,488.0
- Market cap (Btm): 269,280.0
- Market cap (US\$m): 7,704.7
- 3-mth avg daily t’over (US\$m): 15.3
- 52-week high/low: Bt70.00/Bt52.50
Major Shareholders
- Central Holding Co., Ltd.: 26.2%
- Thai Nvdr Company Limited: 8.1%
- South East Asia Uk (Type C) Nominees Limited: 2.7%
Financial Highlights
Central Pattana posted a net profit of Bt4.1 billion in 3Q24, which is flat year-on-year (yoy) and down 19% quarter-on-quarter (qoq). The results are in line with expectations. The softened earnings were primarily due to lower residential transfers and forex loss. However, CPN is well-positioned to close 2024 with a record-high performance.
3Q24 Results
| Metrics | 3Q23 | 2Q24 | 3Q24 | yoy % | qoq % | 9M23 | 9M24 | yoy % |
|---|---|---|---|---|---|---|---|---|
| Sales and services | 11,918 | 12,876 | 12,243 | 2.7 | (4.9) | 32,764 | 36,824 | 12.4 |
| Operating EBIT | 4,401 | 4,959 | 4,964 | 12.8 | 0.1 | 11,746 | 14,321 | 21.9 |
| Equity income | 579 | 524 | 633 | 9.4 | 20.8 | 1,587 | 1,753 | 10.4 |
| Net profit | 4,162 | 4,556 | 4,126 | (0.9) | (9.4) | 11,085 | 12,836 | 15.8 |
Performance Insights
Despite a challenging quarter, CPN’s revenue from the rental and service business rose to an all-time high of Bt10.3 million, up 10% yoy and 3% qoq. This growth was supported by newly-opened malls such as Central Westville, Central Nakhon Sawan, and Central Nakhon Pathom, as well as an improvement in tenants’ sales. Hotel revenue increased by 23% yoy and 4% qoq, with an improved overall occupancy rate of 71% and the addition of a new hotel, Hilton Garden Inn. However, residential revenue declined significantly by 49% yoy and 49% qoq as transfers of key condominium projects were completed. The gross profit margin improved to 57% from 54% in 2Q24 and 52% in 3Q23 due to effective cost management and favorable energy pricing.
Key Financials
| Year | 2022 | 2023 | 2024F | 2025F | 2026F |
|---|---|---|---|---|---|
| Net turnover (Btm) | 35,575 | 45,613 | 50,073 | 52,349 | 53,641 |
| EBITDA (Btm) | 19,473 | 24,924 | 28,181 | 29,851 | 31,184 |
| Operating profit (Btm) | 10,923 | 16,379 | 19,029 | 20,042 | 20,618 |
| Net profit (rep./act.) (Btm) | 10,760 | 15,062 | 17,006 | 18,097 | 18,563 |
| EPS (Bt) | 2.4 | 3.4 | 3.8 | 4.0 | 4.1 |
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for CPN, with a new target price of Bt86.00, based on the SOTP method. The target price is rolled over to the end of 2025, valuing CPN’s core business at Bt84.60/share, based on DCF with a WACC of 7.3%. Cash flows are discounted to 2024, and the residential business is valued at Bt1.40/share, assuming 7x 2024F PE.
Future Expectations
It is expected that CPN will close 2024 with a record-high net profit again. Earnings are expected to improve yoy in 4Q24, mainly driven by increased rental and hotel revenues, benefiting from the high tourism season and new project launches. However, earnings may remain flat qoq due to anticipated SG&A expenses. The company’s resilient financials, business strategy, and expansion plans for Central Krabi and Central Park in 2025, along with other projects in the pipeline, are expected to support continued earnings growth in 2025.
Environmental, Social, Governance (ESG)
Environmental
CPN is committed to reducing energy consumption and promoting renewable energy. The company practices effective waste management by recycling, segregating waste, and minimizing single-use plastics.
Social
CPN prioritizes community engagement and green spaces. It provides educational programs, health campaigns, and support for underprivileged groups. The company also creates parks and gardens to provide recreational areas for visitors.
Governance
CPN emphasizes ethical, transparent, and auditable business conduct for sustainable growth through a Code of Conduct and Corporate Governance Principles handbook.
Conclusion
Central Pattana Public Company Limited (CPN) demonstrates strong fundamentals and an undemanding valuation. With the expected record-high performance in 2024, strategic expansions, and solid ESG commitments, CPN remains a highly attractive investment. UOB Kay Hian’s recommendation to maintain a BUY position with a target price of Bt86.00 underscores the potential for substantial growth and profitability in the coming years.
