Buy Phoenix Mills - Annuity income could grow 4x in four years::JPMorgan,

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We hosted Phoenix Mills for investor meetings as part of J.P. Morgan India
Emerging Opportunities Access Day. Management commentary was fairly
optimistic on the back of portfolio growth coming from market city
completions (5.3msf by FY13 from c0.9msf), rent renewals at HSP (+10-15%
upside to avg. rentals) and increasing visibility on Phase II launch plans.
Overall the company expects the rental income to increase to US$150MM
(PML stake ~55%) on stabilization (by FY15/16) from US$40MM currently.
Key takeaways of the meetings include -
 HSP continues to register steady performance with robust footfalls
(1.6M/month) given festive season. Recent anchor tenant renewals and area
reconfiguration is expected to push up rentals from Dec-Q. Overall, revenue
from HSP is expected to increase to ~Rs2B in FY12 (vs. Rs1.75B in FY11).
On Phase IV, there is limited visibility on the development plans as yet.
 Response to Pune market city (opened in June) has been a fairly decent
with average footfalls of 0.4MM/month and 60% space already operational.
Overall mall is 85% leased at avg. rentals of Rs60-65psf pm. Marginal rents
are currently in the range of Rs130-150psf.
 Upcoming projects may get delayed by 1-2 months: Work on other
market cities is progressing well with Bangalore expected to be launched in
Oct end and Kurla opening by Nov/Dec. ShangriLa hotel launch has been
pushed further to Jan/Feb. Refer to page 3 for detailed asset wise update.
 Visibility on phase II (of market cities) improving with Chennai
residential launched already (30% sold @ Rs6-6.5K psf) & launch approvals
for Bangalore W underway. Overall 4.3msf (PML ~52%) of area is expected
to be launched for sale (residential/commercial) over the next 1-2 years.
Proceeds from this will be utilized for debt reduction at market city projects.
 Revisiting hospitality plans: The company is revisiting its hospitality plans
given the capital-intensive and long-gestation period for hotel projects. PML
plans to go ahead with only ShangriLa and Agra hotel, while remaining
hotel projects (Kurla, Pune) will likely be converted into mixed-use projects.
 Consolidated gross debt at Rs12.5B increased by ~Rs3B in Sep-Q due to
capex on assets nearing completion & partly as a war chest (as liquid funds)
for any expansion opportunity via stake increase in SPVs or new projects.