PLAT: The Platinum Group

Stepping into the next growth phase.

The Platinum group is property developer of the successful wholesale shopping mall in the heart of Bangkok called “The Platinum Pratunam fashion mall” which always perform at their best with nearly 100% of occupancy rate and ability to increase rental price at inflation growth 3-5% per annum. In addition, the company also own a 4-stars hotel – Novotel Bangkok Platinum Pratunam which located on the shopping mall. This hotel has been operating since November 2011 with continuous improvement and it contributed 20% of total gross profit in 2017. However, the company has the lackluster projects which poorly perform but has no significant impact are The Wharf Samui and Neon Downtown Night Market.

PLAT was IPO in 1q2015 and raised capital around 5 bn baht in order to build new projects which are The Market Bangkok (Shopping Mall, Office space, Hotel) and Holiday Inn at Samui. Total investment was finalized at 9.9 bn baht. And the company expects these projects will be the next growth phase in the future.

Investment Thesis

  • Robust performance of Existing projects.
    • The Platinum Pratunam fashion mall has long-term contracts that was initiated since the opening of the mall in November 2005 which will be vastly expired in 2020-2021 and will be converted to short-term contract that would lead to increasing in avg. rental rate from 3,101 baht/sqm/month in 2017 to approximately 4,200 – 4,400 baht/sqm/month due to the short term contract (1-3 yrs) is priced at 4,000 baht/sqm/month with growth by 2-3% of each renewal contract while long term contract (over 10 yrs) is priced at 1,609 baht/sqm/month without growth. The proportion of Short-term contract and Long-term contract in 2017 was 63:36.
  • New Projects create new value.
    • The Market Bangkok
      • The Shopping Mall – expects to be open in Dec-2018 with total leasable area of 34,700 sqm. (28,000 sqm. for the first phase (M1-2) and 6,700 sqm. for the second phase (M3)). This mall will contribute revenue around 600-700 mb in 2019. There is grace period left for a year in 2019 from Crown Property (Land lord) which the company will have no rental expense in 2019. This lead to exceptional Gross Profit Margin for one year.
      • Office at the market – expects to be open in 1q2022
      • Hotel at the market – expects to be open in 3q2020 and 1q2022
    • Holiday Inn Express and Holiday Inn Resort Samui – expects to be open in 3q2020
  • Strong Balance sheet and Healthy Cash flow.

Existing Projects

Source: Company report

The Platinum Fashion Mall

  • The biggest wholesale and retailing fashion shopping mall over 2,600 shops where had opened since November 2005
  • Investment: Approximately 5 billion Baht (2.6 billion Baht of building 1 and 2.4 billion Baht of building 2)
  • Total Area = 113,650 sqm. and Net Leasable Area = 23,087 sqm.
  • Location: Ratchaprasong Area, Bangkok, Thailand. Pratunam is traditional center of wholesale and retail of shopping fashion area.
  • Target customer: Tourist, Reseller, Retail customer.
  • Total revenue in 2017 = 1,161 mb.
  • Occupancy rate is always at 98-99%
  • rental rate was 3,153 baht in 4q17 and as I said that the long-term contract will be expired in 2020-2021 which send avg. rental rate up to 4,200 – 4,400 baht/sqm/month. This will contribute incremental income of rental revenue for 400 mb in 2021 relative to rental revenue in 2017.

Plat-FM-occ rate-rental rate-rev-gp

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Novotel Pratunam – Hotel business

  • Novotel Bangkok Platinum Pratunam aims to complement the Platinum Fashion Mall business as it provides the hospitality services to those visiting The Platinum Fashion Mall. It is managed by Accor Group.
  • Commercialized date: November 2011
  • Building: Floor 6th – 25th of Building 2 of The Platinum Fashion Mall (Extension Zone)
  • Hotel type: 4-star Hotel
  • No. of Rooms: 288 rooms
  • Initial Investment: 900 million baht.
  • Visitor breakdown: Singapore 33%, Malaysia 15%, Indonesia 12%, China 3% and other
  • Total revenue in 2017 = 387 million baht

Novotel Pratunam has improvement every year on avg. room rate that grew from 2,000 baht/room/night in 2012 to 3,586 baht/room/night in 4q17 with the occupancy rate at 80-90%.

Novotel-Rev-ARR-occ.JPG

Novotel-RevPar.JPG

The Wharf Samui

  • The first beachfront community mall in SamuiIsland. The concept of the project falls under fisherman village after colonialism period.
  • Location: Bo Phut Beach, Situated on a 12-rai Land Next to future hotel project (Holiday Inn at Samui)
  • Total Area = 12 rai and Net Leasable Area = 5,303 sqm.
  • Commercialized date: Jan-2015
  • Total revenue in 2017 = 32 million baht.

The Wharf Samui is not promising as it was planed due to mainly focus on only tourist and there is no recurring customer who would consistently generate traffic to the mall when there is no traffic, it’s impossible for tenants to survive. But as you know, Its revenue is accounted only 2.5% of total revenue.

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NEON Downtown Night Market

  • The new night market in the center of Bangkok gathered with 840 shops of foods, goods, and fashion which is opened on Wednesday to Sunday at 16.00-24.00 hours – Plan to operate 7 days a week in 2018
  • Situated between Soi Petchaburi23-31 on Petchaburi Road
  • Total Area = 10 rai / Leasable area = 5,026 sqm
  • Commercialized Date in Dec-2016
  • Rental revenue in 2017 = 66mb.

Neon market.JPG

Financial Highlight

Revenue structure

Rev-breakdown

Profitability Index

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EBITDA and Net Profit.JPG

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  • PLAT has excellent Gross Profit Margin due to the successful of Platinum Pratunam Fashion mall which the majority of tenants is SMEs and Wholesaler which gives the mall an ability to command the rental price and other reason is PLAT has no Land rental expense of Platinuam Pratunam Fashion Mall. Therefore, GPM of PLAT is roughly 75% vs 50% of CPN (Central Pattana PLC). However, I think a new mall “The Market Bangkok” will lower PLAT GPM to appropriate level as same as other shopping mall developers.
  • The company generated EBITDA roughly 300 mb per quarter and Net profit at 200 mb per quarter without any Interest-bearing Debt which reflect in low DE ratio at 0.20 times so we will see a low ROE (Return on Equity) compared to other shopping mall developers.

New Projects create new value

future projects.JPG

  • Total investment of The Market Bangkok including Shopping mall, Office space and Hotel is 9 bn baht.
  • Total investment of Holiday Inn at Samui is 900 million baht.
  • The Grand total investment is 9.9 bn Baht.

The Market Bangkok

Retail Shopping Mall

  • Total leasable area = 34,700 sqm
    • 1st phase (M1-2) = 28,000 sqm. expects to be open in Dec-2018
    • 2nd phase (M3) = 6,700 sqm. expects to be open in 2020
  • Land lord: Crown Property (Leasehold for 30yrs.) – PLAT won bidding of this land for lease 30 years with 4 years grace period of construction which PLAT expects to pay rent in Dec-2019. Therefore, the Market Bangkok shopping mall will be operated without rental expense in 2019. We assume rental expense for 250 mb each year with 3-5% growth that derived from management guidance that total NPV of this lease contract is around 8 bn.
  • Total Investment: 4.4 bn baht
  • Tenant Mix: 35% – Fashion clothes and accessories (retail) / 35% allocated to restaurants and 30% is other tenants.
  • Estimated revenue in 2019 is roughly 600 – 700 mb on the assumption that
    • rental rate = 2,000 baht/sqm/month (reference: Terminal 21 shopping center at Asoke BTS.)
    • Occupancy rate = 80%

Terminal 21 performance

Source: LHSC – LH SHOPPING CENTERS LEASEHOLD REAL ESTATE INVESTMENT TRUST

T21-rev-occ-rental.JPG

T21-Tenant and contract expired

Office at The Market

  • Located on M2 with total leasable area of 38,000 sqm.
  • Commercial operation Date: 1q2022
  • Total investment: 1,900 mb
  • Estimated revenue in 2023 at around 200 mb per year on the key assumption that
    • rental rate = 650 baht/sqm/month
    • Occupancy rate at 70%

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Ref. Office at Central World

Source: CPNCG (CPN COMMERCIAL GROWTH LEASEHOLD PROPERTY FUND)

CTW-office.JPG

Hotel at The Market Bangkok

  • As the latest plan that was disclosed in annual report 2017, there will be a 4-star hotel on shopping mall M1 and M3 in 3q2020 and 1q2022, respectively.
  • Total rooms = 962 rooms (M3 = 430 rooms and M1 = 532 rooms)
  • Hotel manager is already finalized.
  • Total investment = 2.7 bn baht (M3 – 1.3 bn baht and M1 – 1.4 bn baht)
  • Estimated revenue in 2021 and 2023 is 481 million baht and 1,000 million baht based on conservative assumption of
    • room rate at 3,300 baht/room/night (ref. Novotel Pratunam)
    • Occupancy rate at 60-70%

Ref. Grande Centre Point Terminal 21

Source: LHHOTEL- LH HOTEL LEASEHOLD REAL ESTATE INVESTMENT TRUST

Total room = 462 rooms

Grande Centerpoint T21.JPG

Holiday Inn Express and Holiday Inn Resort

  • 3-star for Holiday Inn Express and 4-star for Holiday Inn Resort
  • Total Room 329 units
  • Location: Samui
  • Total investment: 900 mb
  • Commercial operation Date: 3q2020

Risk

  • Recent resignation of CEO and CFO may lead to negative in sentiment and operation.
  • Failure of new projects

Please note that as an Investor, we have to do a sufficient amount of work in order to ensure that our assumption is feasible and viable because all of the future projects are subjected to many kinds of risk which will significantly impact the estimated value of the company.

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