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Phoenix Mills (PHNX)
Property
Execution focus. PHNX’s annual report analysis reveals (1) consolidated debt draw
down close to peak with D/E at 0.4X and (2) focus on execution (Pune launch, property
sales at Mumbai, Pune and Chennai) with minimal addition to planned development.
Key to monitor would be (1) performance of the recently launched Pune market city
and (2) launch plans for Bangalore and Chennai. We tweak estimates and retain our
BUY rating with a target price of Rs300 (unchanged) at par with our March 2013 NAV.
Consolidated D/E at 0.4X; close to peak for existing properties under construction
Phoenix’s consolidated debt has increased to Rs7.4 bn from Rs3.5 bn as of end-FY2010 led by
drawing down of debt in under-construction projects – Pune market city, Shangri La, and Phoenix
United, Lucknow (as part of BARE). Consolidated D/E has increased to 0.4X from 0.2X yoy and we
expect it to be close to peak as Shangri La is the only significant project for which Phoenix would
still need to draw down debt. At the parent company level, PHNX has repaid Rs1 bn of term loans
and is now net cash.
Execution, though with delays, was the highlight of FY2011
In FY2011, PHNX has (1) increased equity stakes in the Bangalore and Pune market cities, (2)
launched Phoenix United, Lucknow (0.36 mn sq. ft mall) and (3) launched commercial property for
sale in Kurla and Pune market cities. We find launch of market cities delayed by an average of 2-3
quarters and expect the launch of the Kurla and Bangalore market cities in FY2012 post the Pune
launch in 1QFY12.
HSP and Palladium remain the key revenue-generating assets
FY2011 was the first full year of operations for Palladium and annual footfalls increased 53% yoy
to 15.1 bn while trade volumes are up 80% to Rs7.8 bn even as per sq. ft average trade increased
12% yoy in FY2011. Standalone revenues increased 52% yoy and, though have come down as a
% of consolidated revenues from 94% to 84%, still remain the pre-dominant revenue driver.
We retain our BUY rating; other market cities openings and residential launches are key triggers
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 FY2012)
of at least 0.5 mn sq. ft could act as potential triggers. The company has soft launched some
residential areas in its Chennai market city and initial response has been encouraging. Key risks
include further delays in launches and an increase in cap rates with increase in interest rates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Phoenix Mills (PHNX)
Property
Execution focus. PHNX’s annual report analysis reveals (1) consolidated debt draw
down close to peak with D/E at 0.4X and (2) focus on execution (Pune launch, property
sales at Mumbai, Pune and Chennai) with minimal addition to planned development.
Key to monitor would be (1) performance of the recently launched Pune market city
and (2) launch plans for Bangalore and Chennai. We tweak estimates and retain our
BUY rating with a target price of Rs300 (unchanged) at par with our March 2013 NAV.
Consolidated D/E at 0.4X; close to peak for existing properties under construction
Phoenix’s consolidated debt has increased to Rs7.4 bn from Rs3.5 bn as of end-FY2010 led by
drawing down of debt in under-construction projects – Pune market city, Shangri La, and Phoenix
United, Lucknow (as part of BARE). Consolidated D/E has increased to 0.4X from 0.2X yoy and we
expect it to be close to peak as Shangri La is the only significant project for which Phoenix would
still need to draw down debt. At the parent company level, PHNX has repaid Rs1 bn of term loans
and is now net cash.
Execution, though with delays, was the highlight of FY2011
In FY2011, PHNX has (1) increased equity stakes in the Bangalore and Pune market cities, (2)
launched Phoenix United, Lucknow (0.36 mn sq. ft mall) and (3) launched commercial property for
sale in Kurla and Pune market cities. We find launch of market cities delayed by an average of 2-3
quarters and expect the launch of the Kurla and Bangalore market cities in FY2012 post the Pune
launch in 1QFY12.
HSP and Palladium remain the key revenue-generating assets
FY2011 was the first full year of operations for Palladium and annual footfalls increased 53% yoy
to 15.1 bn while trade volumes are up 80% to Rs7.8 bn even as per sq. ft average trade increased
12% yoy in FY2011. Standalone revenues increased 52% yoy and, though have come down as a
% of consolidated revenues from 94% to 84%, still remain the pre-dominant revenue driver.
We retain our BUY rating; other market cities openings and residential launches are key triggers
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 FY2012)
of at least 0.5 mn sq. ft could act as potential triggers. The company has soft launched some
residential areas in its Chennai market city and initial response has been encouraging. Key risks
include further delays in launches and an increase in cap rates with increase in interest rates.
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