Target Price: CLP 1,090 Recomendation: Sell Risk: Medium

Transcripción

1 feb-13 abr-13 jun-13 ago-13 oct-13 dic-13 Parque Arauco Target Price Update Target Price: CLP 1,090 Recomendation: Sell Risk: Medium January 31st, 2014 Sector: Construction & Real State Analyst: Martín Antúnez F: Company Info Ticker: PARAUCO CI Equity Closing Price (CLP per share): 950 Range 12M (CLP por acción): 927 1,364 Daily Volume (USD millions): 2.3 Shares (millions): Market Cap (USD millions): 1,260.8 Shares / ADR: N/A Share Price (12 months) Base January 2013= Parque Arauco IPSA Recommendation and Investment Thesis We have updated our coverage of Parque Arauco, setting a target price of CLP 1,090 per share at the end of 2014, with a recommendation to Sell and a medium Risk, which considers an increase of 14.7% in the price and a dividend yield of 2.4%, and a total return of 17.1%. Our recommendation is based in the following arguments: Colombia, main source of growth. In 2008, the company entered the Colombian market, opening its main shopping mall, Parque Arboleda, in As of January this year, 97% of the mall has been occupied. In 2013, the regional mall Parque Caracolí opened its doors, with 8,000 m2 of GLA, and for 2014, the construction of its most important project in that country is expected: a regional mall with 63,428 m2 of GLA (La Colina). We estimate that Parque Arauco has a great growth potential in Colombia. Strong expansion plan for the next 4 years. They expect to invest USD 200 million annually during the period, totaling USD 800 million. USD 289 million of which will be destined to La Colina Project in Colombia, and the rest to projects in Peru, Chile and the rest of Colombia. Capital Increase. In September, in a stockholders extraordinary meeting it was agreed to increase the company s social capital by million shares. This process should begin in March. This increase will be used for future investments in the 3 operating segments, in line with the company s expansion plan Economic deceleration scenario in Chile. Our target price considers the scenario of economic deceleration we have experienced in the past year and that we expect will continue in A reduction in consumption affects the sales of the lessees which in turn impacts the variable income collected by Parque Arauco. Risks Level of Economic Activity. A deceleration or an economic crisis can affect the company s income mainly for two reasons: First, 15% of the company s income is variable and depends on the sales made by the lessees, therefore, if sales are affected by a crisis, so is the company s income. Second, in a more pessimistic scenario, the lessees could eventually vacate the shopping mall. Political Risk. Changes in urban plans or building permits may also affect the company s projects and reduce their value. alguna en relación a cualquier tipo de operación que un inversionista realice o pretenda realizar respecto de los instrumentos o valores de que se tratan, o en los mercados o

2 Parque Arauco Target Price (CLP): 1,090 Recomendation: Sell Company Description Parque Arauco is a major operator of shopping malls and strip centers in Chile. Revenues are stable because lease agreements are generally long-term and for fixed amounts Parque Arauco has 8 malls in Chile, 10 in Peru and 2 in Colombia (January 2013) The company has an aggresive expansion plan focused on increasing its participation in Colombia and Peru ERR (CLP billions) e 2014e 2015e 2016e Operating income Operating Margin Operating Margin % 79.8% 79.0% 78.8% 78.1% 77.5% Operational profit Operational profit % 69.2% 66.9% 66.8% 66.1% 65.5% EBITDA EBITDA Margin % 71.0% 69.7% 69.5% 68.9% 68.2% Net Financial Expense Non Operating Profit/Loss Earnings Controlling Earnings Net Margin (Controller) % 36.2% 38.3% 37.2% 38.3% 39.1% UPA (CLP / share) Property Structure (June 2013) Balance (CLP billions) e 2014e 2015e 2016e Others Cash & Equivalents % Controller Other Current Assets Shareholders Property, Plant and Equipment ,035 1,142 1,249 26% Other non current assets Said Yarur Total Assets 1,051 1,157 1,345 1,450 1,590 Inv estment Familly Financial Debt funds 9% Total Liabilities % Abumohor Total Stockholders Equity Stockbrokerages Familly 17% 3% Noncontrolling Interest EBITDA Last 12 Months FC (CLP billions) e 2014e 2015e 2016e Operational Profit Adjusted Taxes Peru y Colombia Depreciation & Amortization % Capex Chile 77% Δ Working Capital Free Cash Flow Capital Increase Dividends New Debt Comparables P/E Ratio EV/EBITDA Ratios e 2014e 2015e 2016e Ripley Share Price (CLP) 1, ,090 1,090 1,090 Cencosud P / U (x) Falabella Liabilities/Equity (x) EV / EBITDA (x) EBITDA / Financial Expenses (x) Net Financial Debt / EBITDA (x) ROA (% ) 3.5% 3.5% 3.2% 3.6% 3.9% β (vs IPSA): 1.02 ROE (% ) 6.2% 6.5% 5.6% 6.5% 7.4% WACC: 8.7% Dividend Yield (% ) - 2.2% 2.5% 2.3% 2.8% Source: CorpResearch, Bloomberg, Company Financial Statements.

3 e 2014e 2015e 2016e 2017e 2018e e 2014e 2015e 2016e 2017e 2018e e 2014e 2015e 2016e 2017e 2018e Revenues Chile CLP billions ,2 0,15 0,1 0,05 0-0,05-0,1 In January 2014, Parque Arauco had 694,500 M2 of GLA distributed in Chile, Peru and Colombia, and has announced the opening of 27,900 M2 more that year, an investment of USD 52 million. Nevertheless, the company plans to invest about USD 200 per year, with a conservative bias, and even though we do not know in which projects the remaining Capex will be invested (since the company does not reveal information on new projects until all permits have been awarded), we incorporate this Capex to the model based on the lands owned by Parque Arauco. The situation of each country in which Parque Arauco operates is explained below: Chile Revenues Source: Parque Arauco, CorpResearch Revenues Peru CLP billions Revenues Source: Parque Arauco, CorpResearch Revenues Colombia CLP billions Revenues Source: Parque Arauco, CorpResearch % Variation % variation % variation 0,45 0,4 0,35 0,3 0,25 0,2 0,15 0,1 0,05 0 1,4 1,2 1 0,8 0,6 0,4 0,2 0 In December 2013, Parque Arauco had a leasable area of 374,682 m2 distributed among 6 shopping malls, 1 outlet mall and 8 strip centers. As of 1Q13, Marina Arauco (Mall Center, Boulevard Marina and Mall Center Curicó) stopped being consolidated; this investment shall now be reflected in the company s non-operating income. In 2Q13, Arauco Quilicura was inaugurated, adding 21,560 m2 of GLA to the 9,700 of Sodimac (opened since 2012) and in the 3Q13 an expansion of 7,200 m2 of GLA was carried out in Parque Arauco Kennedy (PAK), where the new luxury district was placed. Therefore, considering the effect of the exit of Marina, the incorporation of new leasable m2, and an increase in income per m2, we expect that quarterly operating income as of December 2013 will not show any variations compared to 4Q2012. For 2014, the company has announced the opening of 2 new projects: Mall Outlet Concepción, Mall Outlet Curauma and additional projects of Arauco Express (Strip Centers), the first of which will be inaugurated during this quarter, the second during the third quarter this year and the third is already under development. The two Outlets total 13,618 leasable square meters, whereas the company will open 2-3 new Strip Centers with an average of 2,000 m2 of GLA each. In addition, the inauguration of Boulevard V (an expansion of PAK) adding up to 952 M2 of GLA is expected for late In this way, we estimate that this company s income will grow by 1.9% in Expansion Plan M2 GLA thousands sep-13 dic-14 dic Chile Peru Colombia

4 Clasificación del Centro Comercial Regional Neigborhood Strip Center M2 of GLA (Sep-13) Peru 30% >20,000 m2 GLA Between 6,000 and 20,000 m2 GLA Colombia 12% Source: CorpReseach, Parque Arauco M2 of GLA (Dic-17) <6,000 m2 GLA Chile 58% Peru As of December 2013, Peru s leasable area was 244,918 m2 distributed amongst 4 regional shopping malls, 5 local shopping malls and 1 outlet mall. Last year, the company opened Mega Express Chincha, Mega Express Barranca, Mega Express Cañete and purchased Lima Outlet Center, adding up to 38,128 m2 of GLA. In addition, expansions were performed in Megaplaza Norte (24,400 m2) and Parque Lambramani (1,390 m2). In summary, 97,750 m2 of leasable area was incorporated last year. To date, the only project announced for the next year is a 2,200-meter expansion at Lima Outlet Center. Quarterly income as of December 2013 and 2014 should increase by 16% and 21.7%, respectively. Colombia As mentioned above, Parque Arauco entered the Colombian market in 2008 and opened Mall Parque Arboleda (34,000 m2) in 2010, then, in 2013, they opened Mall Parque Caracolí (39,500 m2), and the construction of their most important project in that country was approved: La Colina (Bogotá), a regional mall with a leasable area of 63,428 m2. The construction of this mall should begin this year and open in As of December 2013, we expect an increase of 132% in accrued income due to the opening of Mall Parque Caracolí and to higher prices due to the maturity level attained by this country. For 2014, we expect income to grow by 22% YoY due to a greater average leasable area compared to 2013 and the effect of prices, which we expect will continue to grow at annual rates of 3%. Colombia 18% Peru 37% Chile 45% We believe that the Colombian market poses a great opportunity for the company. In addition to appealing growth rates and the low penetration of shopping malls, Parque Arauco has another advantage: for political reasons, it is extremely difficult to get building permits in Bogotá. This creates a barrier to entry for future competitors, which constitutes an important competitive advantage, at least in the short term. Margin pressure due to great number of expansions. Source: CorpReseach, Parque Arauco At a consolidated level, we expect Parque Arauco s quarterly income to increase by 9.4% respect to the same period the previous year. In the case of sales accumulated in December, we expect an increase of 6.6%. We believe that the gross margin will slightly decrease in the next years due to a strong expansion plan and the entry to the Colombian market, where the business has not matured yet. The same should occur with EBITDA, which should also go down slightly in the coming years due to higher administration expenses. Cash flow stability and favorable financial situation for expansion plan Parque Arauco is a financially healthy company, with good solvency ratios and liquidity, and with enough slack regarding the covenant it has with its creditors. As of September 2013 its debt ratio (total liabilities/equity) was 0.84x and the covenant limit was 1.4x. The coverage ratio (EBITDA/financial expenses), which cannot be lower than 2.5x was 3.87x. We expect this situation to continue, mainly due to the stability of the company s cash flows; 85% of leasing

5 income comes from fixed charges, the remaining 15% is variable and depends on the sales made by its lessees. Having incorporated all this in our model, we have concluded that this company s shares are being traded close to their fair price. And with a total return of 17.1% at the end of 2014, compared to a return of 23.1% expected for IPSA, our recommendation is to Sell. P/E Ratio Parque Arauco (Share price/earnings per share) 22,9 21,8 15,9 12,1 14,4 14,6 17, e 2014e Source: CorpReseach, SVS Valuation We have determined Parque Arauco s target price using the discounted cash flows method. For this, we have projected the company s cash flows (nominal and in local currency) up to 2022 and then considered a nominal cash flow perpetuity growth of 3.0%. A discount rate of 8.8%, calculated based on the weighted average from the WACC of the 3 countries the company operates in has been used. This considers a beta of 1.04, a risk-free rate of 5.0%, a risk premium of 5.5%, and a tax rate of 25%. In our model we have considered the value of Marina Arauco, discounting the earnings it should yield to the company at the opportunity cost of equity capital. *Exchange rates as of January 30, 2014.

6 Glosario Término Definición / Traducción Cálculo EBITDA EBITDAR Utilidad antes de intereses, impuestos, depreciación y amortización (Earnings Before Interests, Taxes, Depreciation and Amortization) EBITDA más arriendo de activos fijos (Earnings Before Interests, Taxes, Depreciation, Amortization and Rents) Resultado Operacional más Depreciación más amortización EBITDA más arriendos de activo fijo. Se usa en las industrias aeronáutica y marítima y se reversa el arriendo de aviones o buques EV Valor de los Activos de la Empresa (Enterprise Value) Patrimonio Bursátil más Deuda Financiera Neta más Interés Minoritario EV/EBITDA Múltiplo de valorización. Mientras mayor sea, más cara está la acción EV dividido por Ebitda EVA Valor Económico Agregado (Economic Value Added) Resultado Operacional neto de impuestos sobre capital empleado FCL Flujo de Caja Libre EBITDA menos impuestos menos inversiones más (menos) variación del capital de trabajo Free-float Margen Operacional Ebitda Neto Porcentaje de las acciones que puede transarse libremente en el mercado Porcentaje de las ventas Porcentaje de las acciones que no pertenece a los controladores Resultado Operacional / Ventas Ebitda / Ventas Utilidad / Ventas P/U Relación Precio / Utilidad Precio de la acción dividido por la UPA P/VL Relación Precio a Valor Libro Precio de mercado de la acción dividido por el valor contable de la acción Retorno de Dividendos Retorno FCL Rentabilidad que entrega una acción por concepto de dividendos Rentabilidad del Flujo de Caja Libre que genera la empresa Dividendos repartidos en un año dividido por el precio de la acción FCL / Precio de la acción ROA Retorno de los Activos (Return on Assets) Utilidad del ejercicio / Activo Total ROE Retorno del Patrimonio (Return on Equity) Utilidad del ejercicio / Patrimonio contable UPA Utilidad por acción Utilidad del ejercicio / Número de acciones x Veces YtD Año a la fecha (Year to Date) Variación porcentual en lo que va del año Recomendaciones sobre acciones: se establecen de acuerdo al retorno relativo respecto del IPSA. Se recomienda Mantener cuando se espera que la acción tenga un retorno total similar al del IPSA; Comprar, cuando el retorno esperado para la acción es superior al esperado para el IPSA; y Vender, cuando el retorno esperado para la acción es inferior al esperado para el IPSA. Se define como Retorno similar al del IPSA al que esté dentro de un rango con una amplitud equivalente a un tercio de la variación esperada para el índice, con un mínimo de 5%.

7 CorpResearch Álvaro Donoso Director CorpResearch Estudios Económicos Sebastián Cerda Director Ejecutivo CorpResearch y Estudios Económicos scerda@corpgroup.cl Nicolás Birkner Jefe de Análisis Macro y Financiero nicolas.birkner@corpgroup.cl Karla Flores Analista Económico karla.flores@corpgroup.cl Estudios de Renta Variable Vicente Meschi Subdirector de Estudios de Renta Variable vicente.meschi@corpgroup.cl Sergio Zapata Analista Senior. Sectores: Eléctrico, Utilities. sergio.zapata@corpgroup.cl Cristóbal Casassus Analista Senior. Sector: Banca y Transporte cristobal.casassus@corpgroup.cl Patricio Acuña Analista. patricio.acuna@corpgroup.cl M Josefina Güell Analista. Sector: Retail josefina.guell@corpgroup.cl Martín Antúnez Analista. Sectores: Construcción, Telecomunicaciones. martin.antunez@corpgroup.cl Isabel Bendeck Analista. Sector: Retail isabel.bendeck@corpgroup.cl Rosario Norte 660 Piso 17, Las Condes, Santiago. Teléfono

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