Buy Phoenix Mills - Q3FY12 Result Review - PINC Research

Q3FY12 Result Review - Phoenix Mills - Retail assets going strong; Maintain 'BUY'; TP Rs265

Retail assets going strong

Phoenix Mills' (PHNX) Q3FY12 standalone revenues stood at Rs505mn, up 6.5% QoQ, and 4% above our estimate. EBITDA Margins increased 359bps QoQ to 73.9%. PAT at Rs269mn was up 12.6% QoQ and 11.2% above our estimate. We like the stock primarily because 1) three (Pune, Bengaluru, and Kurla) out of four of its market city projects have commenced operation in the last 9 month and are showing improved leasing and occupancy every month (2) improved average rentals from High Street Phoenix (HSP) will help generate strong cash inflow and an annualised rental of ~Rs2.0bn, (3) repositioning of its hospitality project under Phoenix hospitality (PHCPL) into retail/commercial and residential projects is likely to help PHNX have a better cash flow visibility and reduce debt levels and (4) PHNX may further opt to increase its stake in Kurla, Bengaluru and Chennai market city projects 12-15 months down the line which will help improve stock valuations. We maintain our 'BUY' recommendation on the stock with a TP of Rs265.

- Standalone revenues flat QoQ; Market city projects going strong
- EBIDTA margin and PAT improves further
- PHCPL moving towards Assets light model

VALUATIONS AND RECOMMENDATION

We maintain a BUY on the stock with a target price of Rs265 after assigning a 15% discount to NAV. We believe PHCPL will further enhance the valuation and add to our NAV(considered at book value presently) because all its hotel projects (except Agra) will now be transformed into retail/commercial and residential projects leading to quicker cash flows and help the company to reduce its debt.

Source : Equity Bulls

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