We have re-initiated coverage on CPN with a BUY call to a DCF-derived YE22 target price of Bt74. We like CPN for its position catering to mid- to high-income demographics and its potential to build market share in the post-COVID era (due to expertise at fashioning mall space into lifestyle centers and mixed-use develop-ments). We forecast a 2022-24 core profit CAGR of 38%.
Improved traffic and falling discounts to drive earnings rebound
Thailand’s reopening, a normalizing rental rate, and the opening of new malls will drive CPN’s earnings recovery over the next couple of years. Assuming a smooth Thailand reopening and the ongoing relaxation of travel restrictions globally, we expect the firm to post 2022-24 CAGRs of 17% for revenue and 38% for core profit. We also expect the rental discount to decline from 20-30% during 2020-21 to 10% in 2022, boosting income and profits. Traffic and spending in stores and the opening of new malls will be the earnings drivers, 2023-24. With Thailand reopening, we expect CPN’s locations in the southern and eastern regions (around 33% of total net-leasable area [NLA]) to lead CPN’s business recovery, as malls in those regions will benefit from rising tourist spending.