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Phoenix Mills (PHNX)
Property
In-line quarter, market city launches are trigger for FY2012E. PHNX reported
revenues 4% below and PAT 9% above KIE estimates. Expected launch dates of new
market cities have been pushed back by 3-6 months though we do not see a risk of the
projects stalling. Key triggers remain the launch of these market cities and potential
launch of residential projects in 2HFY12E. We retain our BUY recommendation with a
target price of Rs300 (unchanged) at par with our March-2013E NAV.
Steady quarter but gains from revenue sharing accruing slower than our earlier estimate
Phoenix reported 4QFY11 standalone revenues of Rs468 mn (+36% yoy and +4% qoq) versus KIE
estimate of Rs485 mn led by steady occupancy at Palladium and qoq revenue increase through
sharing of the same from retailers. EBITDA at Rs321 mn (+62% yoy and -2% qoq) was 10% lower
than KIE estimate of Rs357 mn due to higher operating expenses which we would attribute to qoq
volatility. PAT at Rs272 mn (+61% yoy and 14% qoq) is 9% above KIE estimates of Rs249 mn led
by higher-than-expected other income and lower-than-expected interest expense. We would
expect revenues to be stable at a run rate of Rs480-520 mn for the next two quarters and would
therefore expect moderate qoq growth. Key upside triggers could be rent renegotiations at HSP I,
higher revenue share at HSP II and launch of the Shangri-La Hotel (expected in end-FY2012E).
High Street Phoenix on track; progress on market cities slower than expected
In Phoenix Market City, Pune, 150 retailers have commenced fit-outs and the management
expects the mall to be open by June 2011 (earlier March 2011). Key reason cited is the time taken
by retailers for commencing fit-outs. Handover to the retailers has begun In the Bangalore and
Kurla Market Cities and management expects the malls to be open in the next three-six months
(earlier June 2012). We would expect to see retailer-led delays to delay the launch by another onetwo
quarters as seen at the Pune Market City.
PHNX is planning a soft-launch for its residential projects at Bangalore and Chennai in the next
few months – we have not factored in any incremental gains from this in our model.
Retain BUY; market city openings and residential launches are key events in the offing
We believe (1) reducing execution risk and revenue visibility as the three 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. Key risks include further delays in these
launches and an increase in cap rates with increase in interest rates. We have reduced
FY2012E/13E net income by 2%/7% and rolled forward to FY2013E NAV which is balanced by the
marginal reduction in HSP rates and the 3-6 month delay in starting operations at the other
market cities.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Phoenix Mills (PHNX)
Property
In-line quarter, market city launches are trigger for FY2012E. PHNX reported
revenues 4% below and PAT 9% above KIE estimates. Expected launch dates of new
market cities have been pushed back by 3-6 months though we do not see a risk of the
projects stalling. Key triggers remain the launch of these market cities and potential
launch of residential projects in 2HFY12E. We retain our BUY recommendation with a
target price of Rs300 (unchanged) at par with our March-2013E NAV.
Steady quarter but gains from revenue sharing accruing slower than our earlier estimate
Phoenix reported 4QFY11 standalone revenues of Rs468 mn (+36% yoy and +4% qoq) versus KIE
estimate of Rs485 mn led by steady occupancy at Palladium and qoq revenue increase through
sharing of the same from retailers. EBITDA at Rs321 mn (+62% yoy and -2% qoq) was 10% lower
than KIE estimate of Rs357 mn due to higher operating expenses which we would attribute to qoq
volatility. PAT at Rs272 mn (+61% yoy and 14% qoq) is 9% above KIE estimates of Rs249 mn led
by higher-than-expected other income and lower-than-expected interest expense. We would
expect revenues to be stable at a run rate of Rs480-520 mn for the next two quarters and would
therefore expect moderate qoq growth. Key upside triggers could be rent renegotiations at HSP I,
higher revenue share at HSP II and launch of the Shangri-La Hotel (expected in end-FY2012E).
High Street Phoenix on track; progress on market cities slower than expected
In Phoenix Market City, Pune, 150 retailers have commenced fit-outs and the management
expects the mall to be open by June 2011 (earlier March 2011). Key reason cited is the time taken
by retailers for commencing fit-outs. Handover to the retailers has begun In the Bangalore and
Kurla Market Cities and management expects the malls to be open in the next three-six months
(earlier June 2012). We would expect to see retailer-led delays to delay the launch by another onetwo
quarters as seen at the Pune Market City.
PHNX is planning a soft-launch for its residential projects at Bangalore and Chennai in the next
few months – we have not factored in any incremental gains from this in our model.
Retain BUY; market city openings and residential launches are key events in the offing
We believe (1) reducing execution risk and revenue visibility as the three 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. Key risks include further delays in these
launches and an increase in cap rates with increase in interest rates. We have reduced
FY2012E/13E net income by 2%/7% and rolled forward to FY2013E NAV which is balanced by the
marginal reduction in HSP rates and the 3-6 month delay in starting operations at the other
market cities.
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