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Phoenix Mills (PHNX)
Property
Valuation visibility improves further with second launch of FY2012. We attended
the inauguration of Bengaluru Market City (0.9 mn sq. ft). While 75% of the area has
been committed for lease / leased out and 100 stores opened, key to monitor would be
(1) ramp-up of stores and performance of these recently launched (Pune and Bengaluru)
market cities, (2) launch plans for Mumbai and Chennai and (3) potential residential
launches in 2HFY12E. We retain our BUY rating with a target price of Rs300 at par with
our March-2013E NAV.
Previews of Bengaluru Market City
The Phoenix market city in Bengaluru will have a total built-up area of 1.9 mn sq. ft (excluding
hotels) of which 0.85 mn sq. ft will be under retail, 0.65 mn sq. ft will be residential (phase 2 of
development) and 0.5 mn sq. ft will be parking space. Though the annual report mentions the
possibility of a hotel coming up (0.35 mn sq. ft), plans on this front are not concrete yet.
As per 1QFY12 update, 75% of the mall has been committed for lease / leased out at an
average rate of Rs 65/sq. ft. /month (Rs 45/sq. ft/month for anchor investors). The anchor
tenants for the mall are – Pantaloons, Marks and Spencer, Reliance Trendz, PVR, Blue O, Big
Bazaar, Home Town, Max, Pantaloons, Reliance Digital, Reliance Timeout and Zara.
The mall has four levels – ground, upper ground (at road level), first floor and second floor and
shops have opened for business on all floors. The mall also has a separate structure adjacent to
the main building which will house PVR and Blue O (entertainment center). About 160 retailers
have commenced fit-outs of which 100 retailers have either commenced operations or are in
advanced stage of fit-outs.
A Star Bazaar is coming up adjacent to the Phoenix Market City but is not likely to pose a threat
for Phoenix since Star Bazaar is usually positioned as a super market and not a Mall. Prestige’s
Forum Value Mall (0.3 mn sq. ft) is about 8-10 kms from the Market City and enjoys a daily
average footfall of 12,000-15,000 which goes up to 20,000 on the weekend.
We retain our BUY rating; opening of other market cities and residential launches are key triggers
Phoenix has now launched two market cities in FY2012 (Pune and Bengaluru) which gives
justification to our view that though project launches from this point could get delayed, they will
not get stalled. Bengaluru launch also adds visibility to our valuation for PHNX’s stakes in non-
Mumbai Market Cities. We believe (1) reducing execution risk and revenue visibility as the two
malls get operational over the next two quarters and (2) residential launches (Bangalore and
Chennai likely over FY2012) of at least 0.5 mn sq. ft could act as potential triggers. The company
has soft launched some residential area 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
Valuation visibility improves further with second launch of FY2012. We attended
the inauguration of Bengaluru Market City (0.9 mn sq. ft). While 75% of the area has
been committed for lease / leased out and 100 stores opened, key to monitor would be
(1) ramp-up of stores and performance of these recently launched (Pune and Bengaluru)
market cities, (2) launch plans for Mumbai and Chennai and (3) potential residential
launches in 2HFY12E. We retain our BUY rating with a target price of Rs300 at par with
our March-2013E NAV.
Previews of Bengaluru Market City
The Phoenix market city in Bengaluru will have a total built-up area of 1.9 mn sq. ft (excluding
hotels) of which 0.85 mn sq. ft will be under retail, 0.65 mn sq. ft will be residential (phase 2 of
development) and 0.5 mn sq. ft will be parking space. Though the annual report mentions the
possibility of a hotel coming up (0.35 mn sq. ft), plans on this front are not concrete yet.
As per 1QFY12 update, 75% of the mall has been committed for lease / leased out at an
average rate of Rs 65/sq. ft. /month (Rs 45/sq. ft/month for anchor investors). The anchor
tenants for the mall are – Pantaloons, Marks and Spencer, Reliance Trendz, PVR, Blue O, Big
Bazaar, Home Town, Max, Pantaloons, Reliance Digital, Reliance Timeout and Zara.
The mall has four levels – ground, upper ground (at road level), first floor and second floor and
shops have opened for business on all floors. The mall also has a separate structure adjacent to
the main building which will house PVR and Blue O (entertainment center). About 160 retailers
have commenced fit-outs of which 100 retailers have either commenced operations or are in
advanced stage of fit-outs.
A Star Bazaar is coming up adjacent to the Phoenix Market City but is not likely to pose a threat
for Phoenix since Star Bazaar is usually positioned as a super market and not a Mall. Prestige’s
Forum Value Mall (0.3 mn sq. ft) is about 8-10 kms from the Market City and enjoys a daily
average footfall of 12,000-15,000 which goes up to 20,000 on the weekend.
We retain our BUY rating; opening of other market cities and residential launches are key triggers
Phoenix has now launched two market cities in FY2012 (Pune and Bengaluru) which gives
justification to our view that though project launches from this point could get delayed, they will
not get stalled. Bengaluru launch also adds visibility to our valuation for PHNX’s stakes in non-
Mumbai Market Cities. We believe (1) reducing execution risk and revenue visibility as the two
malls get operational over the next two quarters and (2) residential launches (Bangalore and
Chennai likely over FY2012) of at least 0.5 mn sq. ft could act as potential triggers. The company
has soft launched some residential area 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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