What's changed
We believe that launch/revamp of entertainment options at the Phoenix malls
in Mumbai, Bangalore and Chennai are driving an increase in footfalls and
occupancy. Some key events this quarter at Phoenix Mills include: (1)
Increased entertainment options at Kurla, Mumbai. We saw higher
occupancy and footfalls on our recent visit to the Phoenix mall at Kurla as
various entertainment and leisure retailers ramped up operations, including
the 12-screen PVR Cinemas and Amoeba; (2) IMAX at High Street
Phoenix (HSP). PVR has opened its first IMAX theatre in Mumbai at HSP,
Lower Parel. We expect this to further drive consumption at the mall; (3)
Stake purchases at SPVs. Phoenix Mills has announced stake purchases
at various market cities from IL&FS and Edelweiss Real Estate; and (4)
Luxury mall in Chennai. The company is constructing a luxury mall
measuring 0.2 mn sqft at Chennai in addition to the existing mall.
Implications
We believe that higher occupancy will drive higher rental revenues and
higher footfalls will boost consumption at various malls, leading to higher
revenue share for Phoenix Mills in FY14E. We believe that the luxury mall
in Chennai will drive up rentals over the medium term, as was the case
with the start of Palladium at HSP, Mumbai.
Valuation
We adjust our model for Phoenix Mills to reflect stake purchases in various
SPVs and introduce the luxury mall in Chennai. We raise our FY14E NAV
per share to Rs400 from Rs389 and our 12-month NAV-based target price
to Rs360 from Rs350. Our standalone Phoenix EPS estimates remain
unchanged. Maintain CL-Buy. Key catalysts: 1) continued increase in
consumption at various market cities in FY14; and 2) higher retail FDI
leading to demand for more quality retail space.
Key risks
Sustained GDP slowdown and continued high interest rates.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
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We believe that launch/revamp of entertainment options at the Phoenix malls
in Mumbai, Bangalore and Chennai are driving an increase in footfalls and
occupancy. Some key events this quarter at Phoenix Mills include: (1)
Increased entertainment options at Kurla, Mumbai. We saw higher
occupancy and footfalls on our recent visit to the Phoenix mall at Kurla as
various entertainment and leisure retailers ramped up operations, including
the 12-screen PVR Cinemas and Amoeba; (2) IMAX at High Street
Phoenix (HSP). PVR has opened its first IMAX theatre in Mumbai at HSP,
Lower Parel. We expect this to further drive consumption at the mall; (3)
Stake purchases at SPVs. Phoenix Mills has announced stake purchases
at various market cities from IL&FS and Edelweiss Real Estate; and (4)
Luxury mall in Chennai. The company is constructing a luxury mall
measuring 0.2 mn sqft at Chennai in addition to the existing mall.
Implications
We believe that higher occupancy will drive higher rental revenues and
higher footfalls will boost consumption at various malls, leading to higher
revenue share for Phoenix Mills in FY14E. We believe that the luxury mall
in Chennai will drive up rentals over the medium term, as was the case
with the start of Palladium at HSP, Mumbai.
Valuation
We adjust our model for Phoenix Mills to reflect stake purchases in various
SPVs and introduce the luxury mall in Chennai. We raise our FY14E NAV
per share to Rs400 from Rs389 and our 12-month NAV-based target price
to Rs360 from Rs350. Our standalone Phoenix EPS estimates remain
unchanged. Maintain CL-Buy. Key catalysts: 1) continued increase in
consumption at various market cities in FY14; and 2) higher retail FDI
leading to demand for more quality retail space.
Key risks
Sustained GDP slowdown and continued high interest rates.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
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