Central Pattana PCL: Record rental revenue reinforces growth outlook
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2Q26F results in line, net profit grew 10% y/y on record rental revenue and strong margins
New openings and project rampups should support growth in 2H26 and 2027
A visible multi-year pipeline should sustain recurring earnings growth
Maintain BUY with a DCF-based TP of THB74.25.
CPN reported a solid 2Q26 net profit of THB4.75bn, up 10% y/y but down 4% q/q. Excluding THB99m of after-tax interest income related to the Central Rama 2 lease extension with CPNREIT, core profit was THB4.65bn, rising by a stronger 19% y/y but falling 5% q/q. Core profit growth outpaced revenue growth, driven by rental-margin expansion and a larger contribution from associates. For 1H26, reported net profit rose 14% y/y to THB9.72bn, while core profit increased 23% to THB9.52bn.
Rental revenue reached a record high for the fourth consecutive quarter. Rental and service revenue rose 8% y/y and 1% q/q to THB11.53bn, supported by Central Khon Kaen Campus, the ramp-up of Central Park and Central Krabi, higher occupancy following renovations at Central Pinklao and Central Chaengwattana, and positive same-store rental growth. Retail occupancy remained stable y/y at 91%. The rental gross margin expanded by 1.6ppts y/y to 60.8%, reflecting higher revenue and continued efficiency initiatives, including solar-rooftop installations.
Hotel and residential revenue also improved y/y, although both businesses faced sequential margin pressure. Hotel revenue increased 5% y/y but declined 16% q/q to THB464m due to seasonality. The average hotel occupancy rate was 74%, compared with 75% in 2Q25 and 79% in 1Q26, while revenue benefited from improving performance at Hilton and Centara hotels and three new GO! hotels. Residential revenue rose 29% y/y and 5% q/q to THB640m, led by low-rise transfers, which accounted for 59% of residential revenue. However, the residential gross margin declined to 27.9% from 29.4% in 2Q25 and 34.4% in 1Q26.
Overall operating profitability strengthened y/y but moderated from the seasonally strong first quarter. Gross profit rose 11% y/y to THB7.49bn, with the blended gross margin widening by 1.2ppts to 59.3%. Operating profit increased 10% y/y to THB5.81bn, while operating margin improved to 44.4% from 43.4%. Sequentially, operating profit fell 7%, reflecting seasonally weaker mall and hotel operations and lower residential margins. Share of profit from associates increased 46% y/y to THB741m, partly offsetting a 16% increase in finance costs.
CPN’s balance sheet remains strong, despite a seasonal increase in gearing during 2Q26. Interest-bearing debt stood at THB67.17bn, down 10% y/y following debt repayments but up 12% q/q, consistent with the company’s normal second-quarter funding pattern and the payment of a record THB2.40-per-share dividend in May. Consequently, net interest-bearing debt-to-equity increased from 0.40x at end-1Q26 to 0.49x, but remained well below 0.63x a year earlier.
Debt-servicing capacity remains comfortable and borrowing costs are easing. The weighted-average interest rate declined to 2.64% from 2.77% in 1Q26, while interest coverage remained high at 26.6x. Cash and financial investments stood at THB9.15bn. Although current interest-bearing debt increased to THB29.14bn and the current ratio softened to 0.66x, CPN’s low net gearing, strong recurring cash flow and ample interest coverage should provide sufficient capacity to fund its expansion pipeline.
2Q26 Results Review
Source: Company, DBSVTH
OUTLOOK
We remain positive on CPN’s medium-term outlook despite increasing competition in the retail market. New retail supply is expected to rise gradually over the next few years, but demand should remain concentrated in well-managed destination malls with strong footfall, high occupancy and an attractive tenant mix. CPN’s record rental revenue and 1.6ppt y/y rental-margin expansion in 2Q26 reinforce our confidence in its market-leading portfolio and asset-management capabilities. Its malls should also benefit from improving international tourism and the continued entry of new-to-Thailand brands, alongside existing tenants seeking to upgrade into prime shopping centres.
New openings and the ramp-up of recently completed projects should sustain rental-income growth in 2H26. Central Northville, comprising approximately 40,000 sq. m. of NLA, opened in July, while Central Phuket’s new 10,000-sq.-m. luxury zone is scheduled for 4Q26. CPN should also benefit from rising occupancy at Central Park, Central Krabi and Central Khon Kaen Campus, as well as renovation-completed malls. Three planned hotel openings should provide additional earnings support, although hotel performance may remain seasonally volatile.
The company’s multi-year expansion pipeline should underpin earnings growth beyond 2026. Major projects include The Central (Phaholyothin), scheduled for 1Q27 with approximately 100,000 sq. m. of NLA; CenTRal cENtrAL (Siam Square), with its retail component targeted for 2Q27; and the Central GR9 expansion in mid-2028. Together with new hotels, offices and residential projects, these developments should provide a steady stream of recurring income and further strengthen CPN’s integrated mixed-use platform.
CPN has sufficient balance-sheet capacity to fund its expansion. Net interest-bearing debt-to-equity declined to 0.49x at end-2Q26 from 0.63x a year earlier, despite the payment of a record-high dividend and a seasonal increase in borrowings during the quarter. Its weighted-average interest rate also fell to 2.64%, while interest coverage remained strong at 26.6x. We believe the combination of low gearing and strong recurring cash flow leaves CPN well positioned to execute its development pipeline.
Potential asset recycling provides additional upside. CPN has shortlisted seven mature shopping malls for phased divestment to CPNREIT over the next eight years. We understand that an initial transaction could involve around two assets worth THB15–20bn in late 2026 or early 2027, although management has yet to disclose the assets or confirm the timing. Successful asset recycling would unlock capital from mature properties, provide funding for future expansion and potentially generate divestment gains. We have not incorporated any asset recycling into our forecasts or valuation pending further details.
RECOMMENDATION
Recent underperformance presents an attractive entry point. CPN’s share price has risen 23.5% YTD, underperforming the SET Index’s 28.0% gain. We believe this reflects investors’ preference for AI-related beneficiaries, particularly in the electronics, power and construction sectors, rather than any deterioration in CPN’s fundamentals. Its resilient recurring earnings, visible expansion pipeline, improving balance sheet and potential asset recycling support our positive stance.
Maintain BUY with a DCF-based TP of THB74.25. We continue to view CPN as one of the highest-quality names in the Thai property sector, underpinned by its dominant retail platform, proven execution capabilities and strong financial position. The stock is now trading on a 2026 PE of 15.4x while offering a moderate dividend yield of 3.7%. We maintain BUY.
PE and PBV Bands
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| Source: Setsmart, DBSVTH | Source: Setsmart, DBSVTH |
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