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Phoenix Mills (PHNX)
Property
Another steady quarter, launch triggers ahead. PHNX reported revenues and PAT
5% and 3% below KIE estimates, respectively. Expected launch dates of new market
cities have been pushed back by 2-5 months though we do not see a risk of the
projects stalling. Key triggers remain the launch of these market cities and potential
launch of residential projects in 2HFY12E. We retain our BUY recommendation with a
target price of Rs300 at par with our March-2012E NAV.
In-line 3QFY11
Phoenix reported 3QFY11 standalone revenues of Rs451 mn (+49% yoy, +2% qoq) versus KIE
estimate of Rs473 mn led by steady occupancy at Palladium which has largely stabilized (one new
store opened this quarter). EBITDA at Rs327 mn (+85% yoy, +3% qoq) was 5% lower than KIE
estimate of Rs343 mn due to marginally lower-than-expected revenues. PAT at Rs238 mn (+133%
yoy, 7% qoq) is 3% below KIE estimates of Rs244 mn. We would expect revenues to be stable at
a run rate of Rs450-500 mn for the next two quarters and would, therefore, expect moderate qoq
growth. Key upside triggers could be rent renegotiations at HSP I, higher revenue share at HSP II
and launch of the Shangri-La Hotel (expected in 3Q/4QFY12E).
High Street Phoenix on track; progress on market cities slower than expected
High Street Phoenix saw footfalls of over 1.5 mn in December 2010 with the opening of new
stores such as Armani, Chanel, Levi’s Signature, Crew Republica and Veda.
In Phoenix Market City, Pune, 130 retailers have commenced fit-outs and the management
expects the mall to be open by March 2011 (earlier Feb 2011). Key reason cited is the time
taken by retailers for commencing fit-outs.
Handover to the retailers has begun In Bangalore and Kurla Market Cities and management
expects the malls to be open by end-1QFY12 (earlier April 2011). Key reason has been
construction execution (material/labor availability, contractor delays). We would expect to see
retailer-led delays to postpone the launch by another one-two quarters as seen at the Pune
Market City.
Mall openings and residential launches are key events in the offing
We believe (1) reducing execution risk and revenue visibility as the three malls get operational over
the next two quarters and (2) potential residential launches (Bangalore and Chennai over FY2012E)
of at least 0.5 mn sq. ft could act as potential triggers. We increase our WACC to 15% and cap
rate to 11% and remove the 10% discount to NAV.
Launch of market cities hit by delays though nothing that will derail the projects
PHNX has pushed back expected launch dates of its new market cities by 2-5 months and
we move back our already 1-2 quarter lagging dates by a similar margin.
Changes to our model
We increase our WACC and cap rate by 100 bps to 15% and 11%, respectively, as we
factor in the earlier 10% discount to NAV due to minority shareholding by increasing our
WACC assumption.
We make modest changes to our earnings model for FY2011E to account for 3QFY11
reported earnings (revenues/net profit lowered 6/7%) while we keep revenues and net profit
flat for FY2012E and FY2013E.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Phoenix Mills (PHNX)
Property
Another steady quarter, launch triggers ahead. PHNX reported revenues and PAT
5% and 3% below KIE estimates, respectively. Expected launch dates of new market
cities have been pushed back by 2-5 months though we do not see a risk of the
projects stalling. Key triggers remain the launch of these market cities and potential
launch of residential projects in 2HFY12E. We retain our BUY recommendation with a
target price of Rs300 at par with our March-2012E NAV.
In-line 3QFY11
Phoenix reported 3QFY11 standalone revenues of Rs451 mn (+49% yoy, +2% qoq) versus KIE
estimate of Rs473 mn led by steady occupancy at Palladium which has largely stabilized (one new
store opened this quarter). EBITDA at Rs327 mn (+85% yoy, +3% qoq) was 5% lower than KIE
estimate of Rs343 mn due to marginally lower-than-expected revenues. PAT at Rs238 mn (+133%
yoy, 7% qoq) is 3% below KIE estimates of Rs244 mn. We would expect revenues to be stable at
a run rate of Rs450-500 mn for the next two quarters and would, therefore, expect moderate qoq
growth. Key upside triggers could be rent renegotiations at HSP I, higher revenue share at HSP II
and launch of the Shangri-La Hotel (expected in 3Q/4QFY12E).
High Street Phoenix on track; progress on market cities slower than expected
High Street Phoenix saw footfalls of over 1.5 mn in December 2010 with the opening of new
stores such as Armani, Chanel, Levi’s Signature, Crew Republica and Veda.
In Phoenix Market City, Pune, 130 retailers have commenced fit-outs and the management
expects the mall to be open by March 2011 (earlier Feb 2011). Key reason cited is the time
taken by retailers for commencing fit-outs.
Handover to the retailers has begun In Bangalore and Kurla Market Cities and management
expects the malls to be open by end-1QFY12 (earlier April 2011). Key reason has been
construction execution (material/labor availability, contractor delays). We would expect to see
retailer-led delays to postpone the launch by another one-two quarters as seen at the Pune
Market City.
Mall openings and residential launches are key events in the offing
We believe (1) reducing execution risk and revenue visibility as the three malls get operational over
the next two quarters and (2) potential residential launches (Bangalore and Chennai over FY2012E)
of at least 0.5 mn sq. ft could act as potential triggers. We increase our WACC to 15% and cap
rate to 11% and remove the 10% discount to NAV.
Launch of market cities hit by delays though nothing that will derail the projects
PHNX has pushed back expected launch dates of its new market cities by 2-5 months and
we move back our already 1-2 quarter lagging dates by a similar margin.
Changes to our model
We increase our WACC and cap rate by 100 bps to 15% and 11%, respectively, as we
factor in the earlier 10% discount to NAV due to minority shareholding by increasing our
WACC assumption.
We make modest changes to our earnings model for FY2011E to account for 3QFY11
reported earnings (revenues/net profit lowered 6/7%) while we keep revenues and net profit
flat for FY2012E and FY2013E.
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