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Management commentary was fairly optimistic on the back of portfolio growth coming
from market city completions, rent renewals at HSP (+10-15% upside) and increasing
visibility on Phase II launch plans. Overall company expects the rental income to
increase to US$150M (PML stake ~55%) on stabilization (by FY15/16) from US$40M
currently. Importantly, company has also been increasing debt at the parent company
to fund any opportunity for stake increase in existing SPVs (market city projects).
HSP continues to register steady performance with robust footfalls
(1.6M/month) given the festive season. Recent anchor tenant renewals and area
reconfiguration is expected to push up rentals from Dec-Q. Overall, revenue from
HSP is expected to increase to ~Rs2B in FY12 (vs. Rs1.75B in FY11). On Phase
IV, there is limited visibility on the development plans as yet.
Response to Pune market city (opened in June) has been a fairly decent with
avg. footfalls of 0.4M/month and 60% space already operational. Overall mall is
85% leased at avg. rentals of Rs60-65psf pm.
Upcoming projects may get delayed by 1-2 months: Bangalore is expected to
be launched in Oct end and Kurla by Nov/Dec. ShangriLa hotel launch has been
pushed further to Jan/Feb.
Visibility on phase II (of market cities) improving with Chennai residential
launched already (30% sold @ Rs6-6.5K psf) & launch approvals for Bangalore
W underway. Overall 4.3msf (PML ~52%) of area is expected to be launched for
sale (residential/commercial) over the next 1-2 years. Proceeds from this will be
utilized for debt reduction at market city projects.
Revisiting hospitality plans: The company is revisiting its hospitality plans
given capital-intensive and long gestation period for hotel projects. PML plans to
go ahead with only ShangriLa and Agra hotel; while remaining hotel projects
(Kurla, Pune) will likely be converted into mixed use projects.
Valuation, price target and risks: Our Mar-12 PT of Rs260 is based on a 20%
discount to our SOTP valuation. We use a 13% WACC and 11% cap rate to value
the company’s retail portfolio. A key risk to our view pertains to PML’s minority
stakes in SPV’s developing market city projects. This raises concerns about exits
required by private investor (Rs10B invested) once assets become operational
(though this is still some time away).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Management commentary was fairly optimistic on the back of portfolio growth coming
from market city completions, rent renewals at HSP (+10-15% upside) and increasing
visibility on Phase II launch plans. Overall company expects the rental income to
increase to US$150M (PML stake ~55%) on stabilization (by FY15/16) from US$40M
currently. Importantly, company has also been increasing debt at the parent company
to fund any opportunity for stake increase in existing SPVs (market city projects).
HSP continues to register steady performance with robust footfalls
(1.6M/month) given the festive season. Recent anchor tenant renewals and area
reconfiguration is expected to push up rentals from Dec-Q. Overall, revenue from
HSP is expected to increase to ~Rs2B in FY12 (vs. Rs1.75B in FY11). On Phase
IV, there is limited visibility on the development plans as yet.
Response to Pune market city (opened in June) has been a fairly decent with
avg. footfalls of 0.4M/month and 60% space already operational. Overall mall is
85% leased at avg. rentals of Rs60-65psf pm.
Upcoming projects may get delayed by 1-2 months: Bangalore is expected to
be launched in Oct end and Kurla by Nov/Dec. ShangriLa hotel launch has been
pushed further to Jan/Feb.
Visibility on phase II (of market cities) improving with Chennai residential
launched already (30% sold @ Rs6-6.5K psf) & launch approvals for Bangalore
W underway. Overall 4.3msf (PML ~52%) of area is expected to be launched for
sale (residential/commercial) over the next 1-2 years. Proceeds from this will be
utilized for debt reduction at market city projects.
Revisiting hospitality plans: The company is revisiting its hospitality plans
given capital-intensive and long gestation period for hotel projects. PML plans to
go ahead with only ShangriLa and Agra hotel; while remaining hotel projects
(Kurla, Pune) will likely be converted into mixed use projects.
Valuation, price target and risks: Our Mar-12 PT of Rs260 is based on a 20%
discount to our SOTP valuation. We use a 13% WACC and 11% cap rate to value
the company’s retail portfolio. A key risk to our view pertains to PML’s minority
stakes in SPV’s developing market city projects. This raises concerns about exits
required by private investor (Rs10B invested) once assets become operational
(though this is still some time away).
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