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 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 September 2015, CPN managed 28 shopping centers, with a total retail space of 1.54 million square meters (sq.m.). CPN recently opened Central Festival East Ville with retail space of 34,500 sq.m. in November 2015. 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 92% since 2007. At the end of September 2015, its three new shopping centers, namely Central Plaza Rayong, Central Festival Phuket 1, and Central Plaza Westgate, had ORs of 90%, 95%, and 89%, 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 nine months of 2015, rental and service income increased by 7% y-o-y to Bt16,199 million. The growth was due to the openings of several new shopping centers and a 2% y-o-y rise in same-store rental and service income during the first nine months of 2015. In the next three years, CPN's rental and service income is expected to increase to Bt28,000 million with 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 57% during the first nine 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 was 45% as of September 2015, increasing from 41% as of December 2014. CPN's liquidity remained strong as the ratio of funds from operations (FFO) to total debt was 36% in 2014 and 31% in the first nine months of 2015 (annualized with trailing 12 months), up from 28% in 2013 and 24% in 2012. CPN's financial flexibility was supported by cash on hand of Bt2,500 million and unused credit facilities of Bt8,600 million as of September 2015. Despite the large capital expenditures of Bt23,000 million planned for 2015 and around Bt15,000 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.
Central Pattana PLC (CPN)
Company Rating: AA-
Issue Ratings:
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: Bt600 million senior unsecured debentures due 2017 AA-
CPN188A: Bt1,400 million senior unsecured debentures due 2018 AA-
CPN18OA: Bt500 million senior unsecured debentures due 2018 AA-
CPN208A: Bt1,400 million senior unsecured debentures due 2020 AA-
CPN21OA: Bt300 million senior unsecured debentures due 2021 AA-
CPN221A: Bt1,000 million senior unsecured debentures due 2022 AA-
CPN228A: Bt800 million senior unsecured debentures due 2022 AA-
Up to Bt2,200 million senior unsecured debentures due within 2022 AA-
Rating Outlook: Stable