SET-listed CP Axtra (CPAXT), a wholesale and retail business unit of Charoen Pokphand (CP) Group, plans to invest 12-15 billion baht in a mixed-use real estate development project that has analysts concerned about the company's debt burden and corporate governance.
CP Axtra executives told analysts the company expects the total investment to tally 12-15 billion baht for The Happitat at the Forestias (HFTF), a 398-rai mixed-use real estate development comprising three mall buildings and a central utility plant.
CP Axtra established Axtra Growth Plus (AGP), a direct subsidiary with registered capital of 8.4 billion baht, to invest in HFTF. CPAXT holds a 95% stake in AGP, with the remaining 5% belonging to MQDC Town Corp.
The objective of the investment is to expand CP Axtra's mall business "after completing mall improvements and extensions", said Chananthorn Pichayapanupat, an analyst with KGI Securities (Thailand).
Roughly 80-90% of the funding would come from a bank loan, she said, citing discussions with CP Axtra executives. The first capital investment worth 8.4 billion baht was injected via a bank loan, while the remaining capital investment is expected to be paid in 2025 using working capital.
Globlex Securities dubbed CP Axtra's recent expansion an "unhappy investment with debt and doubt".
"We hold a cautious view of CPAXT's 8-billion-baht investment in The Happitat, given the company's current financial position with interest-bearing debt of 100 billion baht," said analyst Siriluck Pinthusoonthorn. "In our view, CPAXT should prioritise using its free cash flow to reduce its existing debt burden rather than increasing leverage for a project that is not expected to generate positive cash flow in the near term. The project is slated for completion in the second half of 2025, with traffic growth anticipated by 2028."
The additional debt required for the investment is likely to incur an annual interest cost of at least 300 million baht, representing 3% of the company's 2024 net profit forecast, noted the brokerage.
"This raises concerns over near-term financial strain and the incremental pressure on CPAXT's earnings," Ms Siriluck said, adding channelling CPAXT's resources into The Happitat project appears to align with CP Group's interests.
The Happitat investment presents significant challenges due to its proximity to well-established competitors such as Mega Bangna and Bangkok Mall, operated by The Mall Group, making it difficult to attract consistent traffic, according to Globlex. While the project is part of The Forestias, a mixed-use development with more than 1,800 residential units, "occupancy and traffic generation will take time", said the brokerage.
Chavinda Hanratanakool, chairwoman of the Association of Investment Management Companies, said it scheduled a meeting for next week to discuss Thai ESG Fund investment in CPAXT, with the recent transaction affecting the parent company.
"We will decide whether to put the company on a restricted list that prohibits further investment and transactions by the fund, as investors have raised concerns about CPAXT's recent investment," she said.
Shares of CPAXT and CP All (CPALL), which holds a 34.9% stake in CPAXT, fell for a second consecutive day on Tuesday, with CPAXT losing 1.77% to finish at 27.75 baht by midday. CPALL, the operator of 7-Eleven convenience stores, dropped 3.39% to 57 baht.
