Central Pattana Public Company Limited Management's Discussion and Analysis Consolidated Financial Results: 1Q10 Overall Performance Comparison between 1Q10 and 1Q09 performance should be done under the consideration that partial performance of CentralPlaza Pinklao and the two office towers at CentralPlaza Pinklao Project has been transferred to CPN Retail Growth Leasehold Property Fund ("CPNRF") since November 2009 due to the financial lease of most of the assets of those properties to CPNRF. This was one of the main contributions to the changes in the company's performance when comparing this year's performance to that of the same period of the previous year. Noted that there were three non-recurring items of totaling 3,765.9 MB (2,497.9 MB net of tax) incorporated in 4Q09 financial results: 1) A gain of 3,206.9 MB from the financial lease of the assets at CentralPlaza Pinklao to CPNRF. 2) A one-time income of 659.0 MB. 3) A 100 MB sponsorship expense for a development of a public park next to CentralWorld Project. In addition, during the course of 1Q10 the company had reversed a bad debt provision. This led to two non-recurring items of totaling 340.0 MB (280.9 MB net of tax) accounted in 1Q10 financial results: 1) Income from reversal of bad debt of 162.7 MB. 2) Interest income of 177.3 MB. (Please refer to notes to the financial statements for the quarter ended 31 March 2010, no.3). Central Pattana Public Company Limited ("CPN") reported its 1Q10 consolidated net profit of 950.8 MB, up 57.6% y-o-y and down 70.4% q-o-q. The q-o-q decline was attributed to the non-recurring income from the financial lease of assets to CPNRF reported in 4Q09. Likewise, consolidated total revenues registered 3,290.5 MB, representing a growth of 19.3% y-o-y and a drop of 53.1% q-o-q. Without the non-recurring items, consolidated total revenues in 1Q10 would have increased by 13.4% y-o-y, with a solid growth in net profit of 11.1% y-o-y. These improvements were assisted by additional contribution from the new projects and stronger performance of CentralWorld upon lowering its rental discount. On a q-o-q basis, without the extraordinary items, 1Q10 consolidated revenues would have decreased marginally by 0.9%, mainly due to the absence of performance of the assets transferred to CPNRF in November 2009, while net profit would have grown 12.0% as there was significant marketing & promotion spending for New Year celebrations and the grand opening of CentralPlaza Khonkean in 4Q09. Noted that normally a new project yields lower margin than a mature one. This is due to its relatively lower occupancy rate and special rental discount given to assist tenants at a new mall during its initial stage. In light of nascent economy recovery, lower rental discounts were achieved at CentralWorld and most of the new projects while matured projects experienced increases in rental rates and service income. Nonetheless, prolong political unrest for a certain degree is still a drawback on consumer spending. To ensure that cash flow remains steady and is well reserved for under-developing projects and any unforeseen liquidity needs, CPN implemented cost-saving campaigns with expense management through top-line driven basis in addition to adding extra retail carts and kiosks in its retail properties to attain extra rental income. New Developments During 2010 - 2012, CPN anticipated four green-field projects to come on-line. These include 1) Hilton Pattaya Beach Hotel, the hotel component of CentralFestival Pattaya Beach Project-east of Thailand,2) CentralPlaza Chiangrai - north of Thailand, 3) CentralPlaza Rama IX-Bangkok, and 4) CentralFestival Chiangmai - north of Thailand. Constructions of Hilton Pattaya Beach Hotel and CentralPlaza Rama IX are progressing as per schedule. The projects are due to complete in 3Q10 and 4Q11, respectively. For the other two projects, land banks were secured while detailed feasibility studies were under works. These new developments will be funded by internal cash flow, fund raised through CPNRF,and long-term bank loans. Thanks to the company's strong track record and its A+ credit rating, CPN currently has 4,000 MB in short-term credit facilities available and secured long-term loans from banks with available credit line of 3,350 MB. Operational Performance As at March 31, 2010, CPN managed 15 projects (9 projects in Bangkok and 6 projects in provinces). These comprise of 15 shopping centers (totaling 808,839 sqm of leasable area), 6 office towers (totaling 129,984 sqm of leasable area), 2 residential projects (totaling 62 units), and 1 hotel (255 guest rooms). The above leasable areas exclude retail area of CentralPlaza Rama 2, CentralPlaza Ratchada-Rama 3, and CentralPlaza Pinklao, totaling 157,589 sqm, and office area of totaling 33,762 sqm of Pinklao Tower A and B, which have been transferred to CPN Retail Growth Leasehold Property Fund ("CPNRF") of which CPN acts as the property manager. For CPN own retail properties, occupancy rate averaged 95%, down from 96% in 4Q09. Effective rental rate of retail space averaged 1,252 Bt/sqm/mth, down 1.5% y-o-y and flat q- o-q. This was primarily attributed to lower rental rates of new provincial malls in addition to special rental discounts given to tenants at the new malls during their initial stage. For comparative purpose, excluding the five new malls launched during the course of 2008 - 2009, effective rental rate was up 3.2% y-o-y and 1.3% q-o-q to an average of 1,329 Bt/sqm/mth. Occupancy rate for CPN own offices averaged 82%, down from 86% in 4Q09. Take-up rate of CentralPlaza Lardprao's office tower was declining upon the project approaching its closing date for major renovation. Occupancy rate of the office building at its CentralPlaza Chaengwattana stood at 29%, up from 26% in 4Q09. Due to its nature of being an office property, which normally takes approximately 2 years for a building to reach its 80% occupancy rate; hence, low take-up rate of the Chaengwattana's office at its initial stage is considered normal. The remaining space is expected to be leased out by 2011. Table 1: Operation Statistics Retail Shopping Centers Net Leaseable Occupancy Rate (%) Area (Sqm.) 1Q09 4Q09 1Q10 Ladprao 55,583 97% 97% 94% Ramindra 17,159 99% 100% 99% Pinklao 37,463 97% 98% 100% Pattaya Center 15,226 100% 98% 97% Ratchada-Rama3 18,192 99% 99% 99% Chiangmai 75,889 99% 99% 99% Bangna 57,695 98% 98% 99% Rama2 5,937 100% 100% 100% Rattanathibet 76,938 98% 99% 98% CentralWorld 187,028 97% 96% 95% Chaengwattana 65,581 92% 91% 90% Pattaya Beach Festival 56,826 88% 89% 90% Udon Thani 49,452 n/a 98% 98% Chonburi 40,409 n/a 92% 90% Khonkaen 49,461 n/a 87% 91% Total 808,839 96% 96% 95% Note: CentralPlaza Rama 2, CentralPlaza Ratchada-Rama 3, CentralPlaza Pinklao were partially leased out to CPNRF Offices Net Leaseable Occupancy Rate (%) Area (Sqm.) 1Q09 4Q09 1Q10 Ladprao 17,719 97% 96% 71% Bangna 10,007 92% 95% 95% CentralWorld 82,796 95% 95% 95% Chaengwattana 19,462 8% 26% 29% Total 129,984 84% 85% 82% Note: Pinklao Tower A & B offices were leased out to CPNRF Financial Performance Total Revenues Rental and Service Income In property business, 1Q10 rental and service income registered 2,734.9 MB, grew 11.6% y- o-y, primarily from the openings of three new projects - CentralPlaza Undonthani (acquired in 2Q09), CentralPlaza Chonburi (opened in 2Q09), and CentralPlaza Khonkean (opened in 4Q09) in addition to continuous increase in rental rates at all properties. On a q-o-q basis, rental and service income gained 5.0%, mainly driven by a full quarter revenue contribution from CentralPlaza Khonkean and an incremental rental incomes from CentralFestival Pattaya Beach and CentralWorld upon lowering discount rates. Food and Beverage Sales In food center business, 1Q10 food and beverage sales drop 8.1% y-o-y and 12.8% q-o-q to 135.1 MB upon improving market sentiment, which led to change in dinning behavior as shoppers dine more at restaurants. CPN had captured such changes in dinning behavior by increasing numbers of restaurants and food parlors in shopping centers which, in return, yielded more rental incomes to the company. Revenues from Hotel Operations Revenues from hotel operations in 1Q10 registered 37.0 MB. Occupancy rate stood at 68%, unchanged from 4Q09 while revenue per available room (RevPAR) was flat q-o-q. Other Income Other income consisted of incomes from costs charged back to tenants (such as property tax, insurance premiums, renovation costs, etc.), event sponsorships, and other non-recurring incomes. 1Q10 other income amounted to 383.5 MB, up 141.0% y-o-y but down 90.9% q-o- q, due to the inclusion of non-recurring incomes in 1Q10 and 4Q09 performance. The 4Q09 other income incorporated with non-recurring items; 1) a gain of 3,206.9 MB from the financial lease of CentralPlaza Pinklao to CPNRF, and 2) a one-time income of 659.0 MB. During 1Q10, CPN had received a principal repayment of 162.7 MB from a doubtful account, of which a provision was reversed and booked under "Other Income" while its associated interest charge of 177.3 MB was accounted for under "Interest Income." (Please refer to notes to the financial statements for the quarter ended 31 March 2010, no.3). Total Cost Total cost of rental & service and food & beverage included utilities, depreciation and amortization of rented properties, on-site personnel, repair & maintenance and property tax. In 1Q10 consolidated total cost amounted to 1,746.3 MB, up 15.1% y-o-y, due to additional operating costs and depreciation and amortization expenses of the new projects previously mentioned. On a q-o-q basis, total cost declined 2.6% mainly from lower repair and maintenance cost. Total Operating and Administration Expenses Total operating and administration expenses constituted expenses on personnel, marketing and promotion costs, office supplies, professional fees, depreciation and amortization of office equipments. Total operating and administration expenses for 1Q10 stood at 459.7 MB, up 11.9% y-o-y, from increased number of employees to support business expansion. Compared to the previous quarter, the expenses were down 40.2% as 4Q09 operating and administration expenses were inclusive of a one-time sponsorship of 100.0 MB for the development of a public park next to CentralWorld Project. Excluding this extraordinary item, operating and administration expenses would have declined 31.3% q-o-q as there were significant marketing & promotion spending for New Year celebrations and the grand opening of CentralPlaza Khonkean in 4Q09. Net Profit Without the non-recurring items, 1Q10 consolidated net profit would have amounted 670.0 MB, increased by 11.1% y-o-y on additional contribution from new projects and stronger performance of CentralWorld, and grown by 12.0% q-o-q, primarily attributed to increased revenues and lower marketing and promotion spending as previously mentioned. Table 2: Consolidated Results Summary Consolidated Result 1Q09 4Q09Adj 1Q10 1Q10Adj YoY%Chg QoQ%Chg (Bt mil) Revenues 2,757.2 3,155.9 3,290.5 3,127.8 13.4% (0.9%) Retail 2,225.3 2,366.7 2,538.8 2,538.8 14.1% 7.3% Office 218.7 232.0 189.1 189.1 (13.5%) (18.5%) Hotel 0.0 41.4 37.0 37.0 n/a (10.6%) F&B 147.0 155.0 135.1 135.1 (8.1%) (12.8%) Other rental income 7.1 6.3 7.0 7.0 (0.8%) 11.5% Other income 159.1 354.5 383.5 220.7 38.7% (37.7%) Costs 1,517.5 1,793.8 1,746.3 1,746.3 15.1% (2.6%) Retail 1,248.6 1,498.6 1,484.2 1,484.2 18.9% (1.0%) Office 141.0 142.4 126.3 126.3 (10.4%) (11.3%) Hotel 0.0 15.0 13.7 13.7 n/a (8.5%) F&B 121.3 131.3 115.5 115.5 (4.8%) (12.0%) Other rental income 6.5 6.6 6.6 6.6 2.0% (0.2%) Interest income 11.2 4.5 183.5 6.3 (44.0%) 39.1% Operating profit 840.3 697.8 1,268.0 928.0 10.4% 33.0% Net profit 603.2 598.5 950.8 670.0 11.1% 12.0% EPS (Bt) 0.28 0.27 0.44 0.31 11.1% 12.0% Capital Structure As at March 31, 2010, interest-bearing debts stood at 16,642.0 MB, relatively unchanged from that of FY2009 while net interest-bearing debts declined by 4.0% to 13,557.1 MB and comprised of 68% fixed and 32% floating interest rate. Net interest-bearing debt to equity ratio was 0.7 times, unchanged from that of FY2009. 1Q10 interest expenses and financial charges amounted to 168.2 MB, up 4.9% y-o-y and down 11.9% q-o-q, with a weighted average cost of debts of 4.4% per annum, compared to 4.8% in 1Q09 and 4.4% in 4Q09. Table 3: Financial Position Balance Sheet (Bt mil) 1Q09 4Q09 1Q10 %Chg YoY %Chg QoQ Total Assets 46,360.7 50,895.4 51,540.2 11.2% 1.3% Current Assets 4,487.5 3,937.2 4,609.2 2.7% 17.1% Property&Equipment(PP&E) 33,138.0 38,433.5 38,405.9 15.9% (0.1%) Leasehold Right 5,274.5 4,443.1 4,248.8 (19.4%) (4.4%) Total Liabilities 30,586.7 31,887.3 31,577.9 3.2% (1.0%) Interest-Bearing Debts 16,160.0 16,669.4 16,642.0 3.0% (0.2%) Shareholder's Equity 15,774.0 19,008.1 19,962.3 26.6% 5.0% Retained earnings 10,910.4 14,539.8 15,490.7 42.0% 6.5% Table 4: Key Financial Ratios Key Financial Ratios 1Q09 4Q09 1Q10 Liquidity ratio Current ratio (times) 0.5 0.6 0.7 Quick ratio (times) 0.4 0.4 0.5 Days account receivable (days) 17.8 11.9 12.4 Profitability ratio Gross profit margin (%) 45.0% 43.2% 44.2% Net profit margin (%) 21.1% 17.8% 20.6% Return on equity (%) 16.3% 14.0% 14.0% Efficiency ratio Return on assets (%) 5.4% 4.8% 5.2% Financial policy ratio Net debt to equity (times) 0.8 0.7 0.7 Net debt to EBITDA (times) 2.5 2.7 2.5 Interest coverage /1 (times) 8.1 8.6 6.2 Note: /1Cash generated from operation excludes cash payment of endorsed promissory notes