Maybank Recommends CPN’s TP at ฿66 as Shopping Mall Traffic Returns to 90%

As the economy recovers, shopping mall’s traffic in Central Pattana Public Company Limited (CPN) has increased to 85-90% and the company is expecting a significant pick up in its 3Q20 earnings. Maybank Kim Eng has given a “BUY” recommendation on CPN with a target price at ฿66.00/share.

 

Based on the latest update with CPN, Maybank stated that CPN’s shopping malls’ traffic has improved from 60-80% in June to 80-85% in July, 85-90% in Aug and Sep, but traffic of the malls in tourist destinations remained at 60%. Rental discount has gradually decreased from the second half of May at 40-50% to 30%, 25% and below 25% in June, July and August, respectively. The occupancy rate remained stable at 91-92%. Hotel revenues tend to recover based on the rising occupancy of Centara Udon to 50-60% from 0% during the lockdown. Maybank expected CPN’s revenues and profit to pick up strongly in QoQ but still drop YoY.

Rental discount tends to decline and CPN may be able to adjust rental rates up since the middle of next year. The new tenants replacing Isetan’s area of 27,000 sqm. is expected to operate in 2H21 which will be upside to CPN’s income. The new mixed-use projects including Ayudhya, Sriracha and Chanthaburi are scheduled to open in 2021-2023.

CPN’s measures must be taken for safety and taking into account the quality of life as well as giving importance to all stakeholders throughout the value chain. The main challenges are changing consumer behaviour, fierce competition, technology disruption and the impact on society and the environment, including the risk of cyber threats.

 

Nevertheless, Maybank stated that the second wave of the Covid-19 outbreak, lower-than-expected rental rate hikes, failure to open new projects as planned could be a risk in CPN’s operation.