Phoenix Mills Q3FY13 Results Update:: India Nivesh

Phoenix Mills Q3FY13 Results Update
Standalone Financials Review:
1. Top-line of standalone entity (i.e. the High Street Phoenix) reflects (1) ~18.0%
increase in average trading density (from Rs 1,850 psf. pm in Q3FY12 to Rs
2,185 psf. pm in Q3FY13), (2) increase in HSP rental from Rs 177 psf. pm in
Q3FY12 to Rs 204 psf. pm, (3) increase in mall consumption from Rs 2.6 bn in
Q2FY13 to Rs 3.1 bn in Q3FY13.
2. The reported numbers were very much in-line with our estimates. Top-line
grew by 20.1% on a year-over-year basis to Rs 693.4 mn. EBITDA margins of
the company improved from 64.7% in Q2FY13 to 68.3% in Q3FY13.
Improvement in the EBITDA margins got translated to better net margins too
(improved from 46.6% a year ago to 49.2% in Q3FY13).

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Following are the Key updates takeaways from the Q3FY13 management concall:
1. Management has maintained that the current lease rental rates at HSP &
Palladium are at Rs 350-400 / sq. ft. (with exception of some of the anchor
tenants). Combinedly at HSP & Palladium ~0.1 mn sq.ft. of area of leases would
come-up for renewals in FY14E and slightly more that in FY15E.
2. Management expects Shangri-la to break-even at the PAT level from FY15E
onwards. The recent soft launch of the hotel has been at an Average Room
Rate (ARR) of Rs 15,000. In FY15E, non-room revenues would contribute ~55%
of total Shangri-La revenues, with remaining from room revenues.
3. Currently, Simplex Infrastructure is carrying out the residential real estate
project at Bengaluru (W). A total of Rs 1 bn is targeted to be spent towards
TDR purchases (of this some has already been bought).
4. PML has entered in to a binding agreement with Realty Fund & Horizon
Ventures Funding to acquire 26% stake in Phoenix MarketCity Bengaluru for


Rs 680 mn. Management confirmed that the acquisition would be funded
through a combination of internal accruals and debt.
5. Following table highlights details of the sequential increase in incremental
funding of the key projects, which increased by Rs 135 mn.
Following are some of the changes we made to our project specific assumptions to
arrive at revised FY14E based NAV of Rs 288.
1. Even though management expects ~0.1 mn sq.ft. of lease renewals in FY14E
and FY15E, each, we have not factored the same in our model. For HSP we
have modeled ~4.6% revenue CAGR during FY13-15E.
2. Given the favorable outlook towards retail focused developers, when coupled
with better business visibility seen across MarketCity Pune, Bangalore, Kurla,
Shangri-La & HSP (thereby eliminating project risks), we have reduced the
discount rate from 13% to 12% levels.
3. We have seen encouraging lease occupancy trends across the MarketCity
Pune, Bengaluru & Mumbai projects in the last 3 quarters. Accordingly, we
revised our FY13E (from 58.0% to ~70% levels) & subsequent year’s occupancy
rates assumption for Marketcity Pune & Bengaluru. Further, we have
conservatively assumed 70% occupancy rates for Mumbai MarketCity project
(vs. 64.0% earlier) and subsequently revised the occupancy rate assumptions.
4. Given the impressive performance of PML in the last 2-3 quarters, coupled
with stake purchase in MarketCity Bengaluru, we have revised upwards our
top-line & bottom-line estimates for FY13E & FY14E. We now expect the topline
to grow by 44.3% CAGR during FY12-14E, well supported by higher lease
& occupancy rates. Surge in top-line has flown down to bottom-line levels
too, as we now expect the bottom-line to grow by 37.4% CAGR during FY12-
14E.