TRIS Rating has affirmed the company rating and the existing senior unsecured debenture ratings of Central Pattana PLC (CPN) at “AA-”. At the same time, TRIS Rating has assigned the rating of “AA-” to CPN’s new senior unsecured debentures, worth Bt1,000 million (CPN221A). The outlook remains “stable”. The proceeds from the new debentures will be used for business expansion. The “AA-” ratings reflect the company’s leading position in the retail property development industry in Thailand, proven record of managing high-quality shopping centers, reliable cash flows from contract-based rental and service income, and conservative financial policy. The ratings also take into consideration the large amount of capital expenditures needed for business expansion during 2015-2017.
The “stable” outlook reflects the expectation that CPN will sustain the strong operating performance of its shopping centers. Despite pursuing its growth strategy, the company is expected to maintain its financial discipline. The net interest-bearing debt to equity ratio should be kept lower than 1 times.
CPN’s ratings and/or outlook could be revised downward should its operating performance and financial profile significantly deteriorate from the current levels. On the contrary, the ratings and/or outlook would be upgraded if CPN’s expansion strengthens its business position and financial profile.
CPN is the largest retail property developer in Thailand. Its major shareholders are the Chirathivat family (29%) and Central Holding Co., Ltd. (26%), the leading retailer in Thailand. The ownership link with the Central Group is a benefit for CPN since many anchor stores under the group have been strong magnets for shopping centers owned by CPN. As of March 2015, CPN managed 25 shopping centers, with a total retail space of 1.39 million square meters (sq.m.). The centers are located in Bangkok and major cities in Thailand. CPN has long been the market leader in the Thai retail property industry. As measured by total retail space in Greater Bangkok, CPN had approximately 20% market share during the past four years.
CPN’s solid operating performance is attributable to the high occupancy rates (OR) and healthy growth in same-store sales for its shopping centers. The OR of CPN’s shopping centers have been above 94% since 2007. At the end of March 2015, its two new shopping centers, namely Central Festival Samui and Central Plaza Salaya, had ORs of 92% and 94%, respectively. CPN’s rental and service income soared to Bt20,375 million in 2014, a 12% year-on-year (y-o-y) rise. During the first quarter of 2015, rental and service income increased by 10% y-o-y to Bt5,271 million. The growth was due to the openings of several new shopping centers and a 4% y-o-y rise in same-store rental and service income in 2014 and in the first quarter of 2015. In the next three years, CPN’s rental and service income is expected to increase to Bt28,000 million per annum, with total number of 35 shopping centers by 2017.
The company’s operating margin, defined as operating income before depreciation and amortization as a percentage of total revenue, was 54% in 2014 and 65% during the first three months of 2015, up from 51% in 2013 and 49% in 2012. CPN’s ability to increase its rental rates, control operating costs, and control selling and administrative (SG&A) expenses drove profitability higher.
The company’s debt to capitalization ratio improved to 41% in 2014 and 40% as of March 2015, from 47% in 2013 and 59% in 2012. CPN’s liquidity was stronger as the ratio of funds from operations (FFO) to total debt increased to 36% in 2014 and 38% during the first quarter of 2015 (annualized with trailing 12 months), up from 24%-28% during 2012-2013. CPN’s financial flexibility was supported by cash on hand of Bt2,800 million and unused credit facilities of Bt9,000 million as of March 2015. Despite the large capital expenditures of Bt25,000 million planned for 2015 and Bt16,000 million per annum during 2016-2018, TRIS Rating expects that CPN should keep the debt to capitalization ratio at less than 55% over the next three years. FFO is projected to be approximately Bt10,000 million per annum.
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Central Pattana PLC (CPN)
Company Rating: AA-
Issue Ratings:
CPN15OA: Bt500 million senior unsecured debentures due 2015 AA-
CPN164A: Bt1,000 million senior unsecured debentures due 2016 AA-
CPN16OA: Bt1,200 million senior unsecured debentures due 2016 AA-
CPN172A: Bt1,500 million senior unsecured debentures due 2017 AA-
CPN174A: Bt500 million senior unsecured debentures due 2017 AA-
CPN176A: Bt750 million senior unsecured debentures due 2017 AA-
CPN18OA: Bt500 million senior unsecured debentures due 2018 AA- CPN21OA: Bt300 million senior unsecured debentures due 2021 AA- CPN221A: Bt1,000 million senior unsecured debentures due 2022 AA- Rating Outlook: Stable
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