Central Pattana : MD&A Q2/2023 30 June 2023

Central Pattana PLC

Management's Discussion and Analysis (MD&A)

Quarterly Financial Results: 2Q23

EXECUTIVE SUMMARY

In 2Q23, Thailand's economic growth was still mainly driven by tourism and domestic consumption which led to the unemployment rate at approximately 1%, similar to pre-Covid level. Foreign tourists arrival momentum in 2Q23 was also similar to 1Q23 with slightly more than 2 mn incoming tourists per month. In 1H23, total international tourists' arrival was closed to 13 mn vs Tourism Authority of Thailand's (TAT) full- year expectation of 25-30 mn. Top 5 incoming tourists into Thailand in 2Q23 were from Malaysia, China, Korea, Vietnam, and Singapore. In June 2023, total international tourist and Chinese tourist arrivals were 73% and 37%, respectively, of June 2019. Domestic tourist numbers were strong in April thanks to "Rao Teaw Duay Gun" (We travel together) phase 5 (period 7 March - 30 April) but soften in May-June due to seasonality. On electricity tariff, the Energy Regulatory Commission lowered the rate from Baht 5.33/unit to Baht 4.70/unit for the period of May - August 2023 and to Baht 4.45/unit for the period of September - December 2023. Thailand economic expansion in 2023 is expected to grow 3%-4%, driven mainly by tourism sector with double YoY international tourist arrivals anticipation and private consumption growth of 3%.

Central Pattana PLC ("The Company") performance in 2Q23 improved continuously following the strong recovery in 2022. In 2Q23, the Company reported total revenue of Baht 11,133 mn, and a net profit of Baht 3,678 mn, growing 22% and 34% YoY respectively. Total revenues and net profit already exceeded 2Q19 by 21% and 53%, respectively. Total revenues improved QoQ across all businesses especially retail and residential businesses. Excluding the impact of financial reporting standards, the Company's core performance showed a net profit of Baht 3,373 mn, increased by 54% YoY.

In 2Q23, the Company opened Go! Hotel Ban Chang (79 keys), which is located next to Robinson Lifestyle Banchang on 10 May 2023. In addition, it also launched a 9 storey condominium project, ESCENT PHETCHABURI, on 30 June 2023. The project consisted of 196 units with complete facilities and superior location next to Robinson Lifestyle Phetchaburi.

On 26 June 2023, the Company shared the BOD resolution regarding the lease renewal terms of Central Pinklao and Rama 2 as follows:

1. Approval of the lease renewal of Central Pinklao to CPNREIT for the period of 15 years (with the right to renew the contract for another 7 years and 5 months) with the investment value not exceeding Baht 12,161 mn
2. Approval of the amendment to thirty-year lease renewal terms of Central Rama 2 by amending the investment value not exceeding Baht 12,853 mn for the first 10 years of the lease period (16 August 2025 to 15 August 2035). The investment value for the remaining 20 years will be negotiated and finalized at a later stage.

1. Approval of investment by CPN in CPNREIT's new units not more than 60% of the offering size in the upcoming capital increase, implying approximately 660 mn units. This will result in CPN's stake in CPNREIT increasing from 30% to no more than 40%

CPNREIT EGM already took place on 31 July 2023 which the unitholders approved the leases renewal and the fund-raising scheme, and the transaction is expected to be completed in 2H2024. The Company and CPNREIT believe that the investment will be beneficial to CPN as the source of financing for its CAPEX plan and CPNREIT unitholders as the lease renewal of both projects will lead to sustainable attractive returns.

The 2023 Annual General Meeting of Shareholders on April 27, 2023, passed a resolution to approve the dividend payment of Baht 1.15 per share from the 2022 net profit, or approximately at 48% payout ratio from the 2022 consolidated net profit. The payment of dividend was made on May 17, 2023.

OVERVIEW

The Company has 4 business units under management:

1. Rental and services.
2. Food center services,
3. Hotels, and
4. Residential properties for sale

Which also include properties transferred to CPN Retail Growth Leasehold REIT ("CPNREIT"), CPN Commercial Growth property fund ("CPNCG") as well as properties under the management of Grand Canal Land PLC ("GLAND") which is the Company's subsidiary.

Assets under Central Pattana as at 2Q23

Business Type		Total		CPN	CPNREIT	CPNCG
No.	'000 sqm	No.		'000 sqm	No.	'000 sqm	No.	'000 sqm
Shopping Mall
Shopping malls in Bangkok	16	994	16		842	3	152
Shipping malls in provinces	21	863	21		766	4	98
Shopping malls in overseas	1	84	1		84
Total Shopping Mall	38	1,942	38		1,691	7	250
Community Mall	17	173	17		173
Shopping mall under JV	1	169	1		169
Total Retail Business	56	2,284
Other Business
Office	7	169	4		53	2	34	1	82
Hotel	6	1,099 rooms	5		795 rooms	1	304 rooms
Residential for sales to date (high-rise)	19
Residential for sales to date (low-rise)	8
Assets under GLAND
Office	3	145	1		68	2	77
Residential for sales to date (high-rise)	1		1
Residential for sales to date (low-rise)	1		1

The Company has 38 shopping malls (16 in the Bangkok Metropolitan area, 21 upcountry, 1 overseas), 17 community malls, and 1 joint-venture with a total NLA of 2.3 mm sqm. The Company's occupancy rate of shopping mall was slightly increased to 91% in 2Q23 from 90% in 1Q23.

The Company has 10 office buildings for rent with a total rental area of 319,894 sqm. The occupancy rate in 2Q23 was at 87%, decreased from the previous quarter at 89%, as a result of flexible working policy resulting in selected tenants returning the space before contracts mature. However, the Company will receive compensation for early termination and is in the process of negotiating with potential tenants to fill the vacancy.

In 2Q23, the Company has a total of 6 hotels and 1,099 rooms with an average occupancy rate of 61%, slightly lower than the previous quarter of 65% due to seasonality and the new hotel, which is Go! Hotel Ban Chang that opened on 10 May 2023.

The Company has developed a total of 29 residential projects to date. The Company launched Escent Petchaburi project in June 2023. Currently, the Company has a total of 20 projects available for sale and transfer, comprising 11 high-rise projects that are mainly adjacent to the shopping centers and 9 low-rise projects.

ESG ACTIVITIES

The Company is part of Dow Jones Sustainability Index World in real estate industry for the 5th consecutive years with a lifted rank from 8th to 7th. Moreover, the Company remains a part of Dow Jones Sustainability Index Emerging market for the 9th consecutive years.

On 7 June 2023, The Company and Tourism Authority of Thailand (TAT) has announced the partnership in Sustainable Development Goals (SDG) project to support tourism and local wealth in small provinces. The Company has set aside a budget of Baht 400 mn for "Community and Local Wealth" under the project called "Sustainable Tourism Ecosystem" which will be implemented through retail-led tourism, cross- regional model, and national soft power strategies. The first campaign under this project is GO LOCAL, LOVE LOCAL in Nakhon Si Thammarat, followed by Ayutthaya, Ubon Ratchathani, and Chanthaburi.

FINANCIAL PERFORMANCE

2Q23 Profit & Loss Statement reconciliation between F/S and core performance

Unit: Baht mn	Per F/S	Impact from	Core
TFRS16	Performance
Revenue from rental & services	9,230		9,230
Revenue from other businesses	1,635		1,635
Other income	269		269
Total Revenue	11,133		11,133
Cost of rental & services	4,343		4,343
Cost of other businesses	932		932
Administrative expense	1,652		1,652
Operating profit (loss)	4,207		4,207
(+) Share of profit from invested co.	532		532
(+) Investment income	408	(381)	27
(-) Interest expense	663		663
(-) Income tax	769	(76)	692
(-) Minority interest	36		36
Net profit to parent co.	3,678	(305)	3,373

Impact from Thai Financial Reporting Standard

From 2020, the Company has adopted the Thai Financial Reporting Standard (TFRS16) - Leases which impacted the financial statement in terms of differences from actual performance. An impact on the statement of comprehensive profit and loss in 2Q23 was as followed:

• Value adjustment to financial lease: The Company recognized lease receivable from financial lease with CPNREIT in 1Q20 which reflects the present value at transaction date and are recognized receivable from financial lease until 2025 which will reflect the Company's cash flow at that time. In 2Q23, the Company recognized an interest income from the Central Rama 2 lease contract amounting to Baht 381 mn and recorded its deferred tax of Baht 76 mn.

The following management discussion excludes an impact of accounting standard (TFRS16)as mentioned above to the Company's best ability to reflect the financial performance based on actual business events, which may differ from the financial statements reviewed and/or audited by the auditors authorized by the Securities and Exchange Commission of Thailand (SEC). Rental discount already returned to pre-Covid level since 1Q23. Therefore, the following comparison would be based on reported numbers only. The impact of TFRS 16 from rental discount during Covid period on revenue from rental and service income will no longer be presented.

Profit & Loss Statement (Baht mn)	2Q22	1Q23	2Q23	YoY (%)	QoQ (%)		1H22	1H23	YoY (%)
Revenue from rental & services	7,552	8,751	9,230	22%	5%		14,649	17,981	23%
Shopping Mall & Community Mall	7,210	8,389	8,869	23%	6%		13,971	17,258	24%
Office	342	362	360	5%	(1%)		678	723	7%
Revenue from Food Service Center	156	207	245	57%	18%		276	451	64%
Revenue from Hotel Business	203	353	368	81%	4%		330	721	119%
Revenue from Residential Business	665	670	1,023	54%	53%		1,100	1,693	54%
Other Income	575	309	269	(53%)	(13%)		868	578	(33%)
Total Revenue	9,151	10,291	11,133	22%	8%		17,222	21,424	24%
Total Revenue (excl. non-recurring items)	8,806	10,291	11,133	26%	8%		16,877	21,424	27%
Cost of Rental and Service Income	3,804	4,075	4,343	14%	7%		7,431	8,418	13%
Shopping Mall & Community Mall	3,715	3,962	4,229	14%	7%		7,262	8,191	13%
Office	89	113	114	28%	1%		169	227	34%
Cost of Food Service Center	92	109	119	30%	9%		174	228	31%
Cost of Hotel Business	58	118	125	114%	6%		98	243	147%
Cost of Residential Business	453	453	687	52%	52%		760	1,141	50%
Total Cost	4,407	4,755	5,274	20%	11%		8,463	10,030	19%
Total Cost (excl. non-recurring items)	4,407	4,755	5,274	20%	11%		8,463	10,030	19%
Administrative Expenses (incl. impact from TFRS9)	1,492	1,752	1,652	11%	(6%)		2,840	3,404	20%
Operating Profit	3,251	3,784	4,207	29%	11%		5,920	7,990	35%
Operating Profit (excl. non-recurring items)	2,906	3,784	4,207	45%	11%		5,575	7,990	43%
Net Finance Cost/Income Tax/Others	(472)	(511)	(493)	5%	(4%)		(772)	(1,004)	30%
Profit to Non-Controling Interest	(26)	(27)	(36)	37%	34%		(66)	(63)	(4%)
Profit to Parent Company	2,753	3,246	3,678	34%	13%		5,082	6,924	36%
Profit to Parent Company (excl. non-recurring items)	2,189	2,941	3,373	54%	15%		4,239	6,314	49%
EPS to Parent Company	0.61	0.72	0.82	34%	13%		1.13	1.54	36%
EPS to Parent Company (excl. non-recurring items)	0.49	0.66	0.75	54%	15%		0.94	1.41	49%

* 2Q22, non-recurring item: gain of sale of a 10% investment in Vimarnsuriya to Dusit Thani PLC. (Baht 345 mn before tax) in other income

Total Income

In 2Q23, the Company has a total income of Baht 11,133 mn, which increased 26% YoY mainly from the reduction of rental discount that already normalized since 1Q23 and higher 8% QoQ mainly from retail business which saw the full quarter impact of higher common area charges and more transfer of residential units QoQ.

1. Rental & Service businessrecorded revenue of Baht 9,230 mn, increased 22% YoY and 5% QoQ with rental discounts already normalized since 1Q23. The QoQ improvement was from higher common area charges, of which the new rate has been applied since February 2023, higher revenues from casual leasing, and improved occupancy of community mall revenues.
2. Food center servicesposted revenue of Baht 245 mn, increased 57% YoY and 18% QoQ on recovery of footfall traffic to food courts.
3. Hotel businessrecorded revenue of Baht 368 mn, up 81% YoY and 4% QoQ. Occupancy rate was slightly lower in 2Q23 to 61% from 65% in 1Q23 and 60% in 2Q22 due to seasonality and new hotel (Go! Hotel Ban Chang) opened on 10 May. Overall average daily room rate (ADR) dropped 6% YoY from newer hotels that have been opened since 2H22 which has lower ADR and 8% QoQ mainly from seasonality effect, while Hilton Pattaya occupancy was similar QoQ with average daily room rate continued to improve QoQ.