Bualuang Securities May 15, 2013
Overnight placement
Central Pattana Plc (CPN)What’s new?
Last night, private placements were made for 130.4m new shares and there were big lot sales of 83.4m existing shares (sold by Khunying Suchitra Mongkolkitti and Mrs Sukanya Promphan) to institutional and specific investors at a price of Bt50.75.
More trading liquidity = more value
The private placements of 130.4m shares (2.9% of paid-up capital) were expected, but the 83.4m shares (1.9% of paid-up capital) sold by two members of Chirathivat family surprised us. The sales by major shareholders might generate negative sentiment toward the stock in the short term, but they will also mean greater trading liquidity, which will ease liquidity risk and WACC.
Enhancing the growth profile
The share dilution of 2.9% is minimal. The proceeds of Bt6.6bn from the cash call should enable CPN to speed up its expansion. We expect the firm to soon announce new projects in addition to those (3-4 malls a year) under its current CAPEX plan, which would enhance its long-term growth profile further. As such, EPS dilution should be only a short-term phenomenon.
Spin-off gain still underway
Although net gearing has fallen to only 0.44x, the plan to spin off the Chiangmai and Ramindra properties to CPNRF remains in place (albeit delayed somewhat to late 3Q13 or early 4Q13). CPN still needs to monetize assets in order to finance huge CAPEX plans of Bt14-15bn/year in FY13-14 and around Bt10bn in FY15 (excluding the additional projects). We estimate a spin-off gain of about Bt3.8bn, to be booked in either 3Q13 or 4Q13.
BUY rating stands
With the private placements completed, we don’t see any obvious negative events that would put downward pressure on the share price within the next 12 months. Indeed, we expect positive new flows/events to prompt earnings forecast and valuation upgrades, such as new project announcements and spin-off gains. As such, if the share price were to decline to a level near the placement price, we think it would present a great opportunity to take or increase positions. With 18% upside to our YE13 target price of Bt63, our BUY rating stands.
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