Phoenix Mills - Steady quarter, retain BUY :: Kotak Sec

Visit http://indiaer.blogspot.com/ for complete details �� �


Phoenix Mills (PHNX)
Property
Steady quarter, retain BUY. PHNX reported a steady operating quarter with revenues
and PAT 2% and 6% above KIE estimates, respectively. Key market city launches over
the next 12 months remain triggers while (1) increase in stake in the Pune project by
8%, (2) finalization of JDA terms for the residential project in Bangalore and (3) mall
management fees for the new malls remain incremental upsides to our estimates.
Retain target price of Rs303 at a 10% discount to our March-2012E NAV of Rs337.


In-line 2QFY11 as Palladium moves towards stabilization
Phoenix reported 2QFY11 standalone revenues of Rs443 mn (+68% yoy and +10% qoq) versus
KIE estimate of Rs435 mn led by steady occupancy and full quarter rentals for tenants which had
started operational in 1QFY11. EBITDA at Rs317 mn (+75% yoy and +8% qoq) was 2% lower
than KIE estimate of Rs322 mn. PAT at Rs221 mn (+26% yoy and 21% qoq) is 6% above KIE of
Rs208 mn due to marginally higher-than-expected other income and lower depreciation. We
would expect revenues to stabilize at a run rate of Rs500-550 mn over the next two-three quarters
and would, therefore, expect to see qoq growth moderate over 2HFY11E.
Progress on market cities continues but with minor delays
􀁠 Phoenix intends to raise its stake in its Pune market city to 58.5% from current 50.5%. We
have not factored any increase in value from this as the consideration is not known but we
would expect it to be value-neutral at worst. Pre-lease remained at 75% while minimum
guarantee monthly rentals remained at Rs60/ per sq. ft. Phoenix is targeting launch in early
January 2011 which is in line with our expectations.
􀁠 Launch of Kurla market city targeted for April 2011, which is three months later than our earlier
expectation. 80% of commercial space launched in July 2010 here has been sold at Rs9,000/sq.
ft, marginally higher than our estimate of Rs8,500/sq. ft.
􀁠 Bangalore market city launch is also expected in April 2011 and hand-over to retailers for fitouts
has already commenced. PHNX has increased its stake from 28.1% to 32.7% in this
project.
􀁠 We see two other possible upsides – (1) PHNX has finalized its JDA terms for the residential
project announced in 1QFY11 and (2) PHNX intends for its subsidiary to manage the malls for
its various market cities, thereby increasing PHNX’s revenue flow from the subsidiaries.