Equity Analysis /

Central Pattana PCL: Necessity for your basket

  • CPN should prove resilient to cost-push inflation

  • Lined up for a strong YoY profit recovery in 2Q22

  • Solid growth profile for 2022 and for years ahead

Bualuang Securities
29 June 2022

Market concerns that cost-push inflation might squeeze company margins and, more saliently, Thai consumer purchasing power puts CPN under the spotlight. We believe the firm’s revenue and cost structure will enable it to prove the most resilient earnings profile among retail/commercial property peers. We have a BUY call to a DCF-derived target price of Bt74. CPN executives will speak at our next event on July 1, Thai Corporate Day: Beyond Recovery.

CPN should prove resilient to cost-push inflation

The company’s revenue and cost structure buffer it from cost-push inflation pressures, we believe. As a mall operator, CPN mostly generates income from fixed rents and revenue-sharing paid by tenants. In a climate of higher cost pressures, many tenants are raising prices (especially QSR operators), boosting SSSG (Figure 1-3), so we expect the firm to post strong rental receipt growth. On the cost side, depreciation is CPN’s biggest expense; it won’t be materially impacted by higher fuel and utility costs. With its high operating leverage, we expect the top-line to rise considerably faster than expenses. Our 2022 model points to growth of 22% in revenue and a whopping 70% in core profit.