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Phoenix Mills (PHNX)
Property
Steady progress on Market City, Mumbai (Kurla). We visited Phoenix Market City,
Mumbai at Kurla, an eastern suburb, and noted steady progress at the site. A few
retailers have moved in for fit-outs, construction is progressing in full swing and we
expect a commercial launch of the mall in 1QFY12E. Expected commercial launches of
three malls (Pune, Bengaluru, Kurla) over 4QFY11E/1QFY12E are potential triggers. We
retain our BUY rating and target price of Rs303 at a 10% discount to our March 2012E
NAV of Rs337/share.
We observe steady progress at Phoenix Market City, Mumbai
We visited Phoenix’s Market City at Kurla, Mumbai and observed steady progress in terms of
construction and retailers moving in for fit-outs. Total area in phase I is 1.3 mn sq. ft of retail space
and 0.25 mn sq. ft of saleable commercial space. Key clients are Star Bazaar, Zara, Big Cinemas,
Pantaloon and MotherCare.
` Retailers. We noticed that a few retailers have already moved in to start fit-outs. Assuming a
two month fit-out time, we would expect substantial increase in this number over the next two
months. Out of the total 322 retail areas, PHNX is in the process or has leased (agreement /
letter of intent / final stages of letter of intent) 274 units.
` Construction. With 1,200 laborers on-site, work is progressing in full swing. We believe it is
the final construction stages as the structural work is complete and we noted glazing and false
ceiling work on certain floors and escalators being installed at certain parts of the mall. While
the mall is expected to be ready for commercial launch by end-March 2011E, we would expect
a launch in 1QFY12E.
` The Marriott hotel (300+ keys) at the same site is targeted for an FY2013E launch and looked
about 15-20% complete.
` While PHNX has sold approx. 80% of the commercial property in the mall building, standalone
commercial building construction work is at early stages and we would not expect this to be
launched in 1HFY12E.
Mall openings and residential launches are key events in the offing
We believe (1) reducing execution risk and revenue visibility as the 3 malls get operational over the
next two quarters and (2) potential residential launches (Bangalore and Chennai over FY2012E) of
at least 0.5 mn sq. ft could act as potential triggers. We assign a 10% discount to our target NAV
of Rs337/share to account for PHNX holding minority stakes in the various Market City projects.
Three mall launches over next two quarters
We expect launch of Phoenix Market City – Pune in 4QFY11E followed by Bengaluru and
Kurla, Mumbai launches in 1QFY12E. With key anchors in place and 55-75% of the retail
space pre-leased, we believe these launches could act as a trigger. In Pune, more than 100
retailers have moved in for fit-outs and we think it is on track for a 4QFY11E launch.
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