The Phoenix Mills - Festive season ushers in consumption revival - ICICI Securities

The Phoenix Mills (PHNX) has informed exchanges that Q3FY21 mall consumption of Rs13.7bn was at 66% of previous year levels and up 192% QoQ. Consumption in Dec-20 was ~Rs5bn and at the same level as Nov-20 and at 70% of Dec-19 levels. Retail rental collections (including CAMs) in Q3FY21 were also healthy at Rs2.6bn (Rs3.9bn for 9MFY21). With higher than expected consumption across malls, we now expect a lower like-to-like FY21E rental income loss of 45% vs. 50% earlier. We expect consumption to stabilise heading into FY22E resulting in PHNX being able to revert to pre-Covid minimum guarantee rentals. We have built in a strong recovery with FY22E rental income of Rs11.4bn vs. Rs10.2bn in FY20. We retain our BUY rating with a revised Mar-22 SoTP based target price of Rs925/share (earlier Rs804) assuming lower cap rate of 7% (8% earlier).

- Festive season sees surge in consumption: While Q2FY21 mall consumption was at 40-55% of previous year levels, Q3FY21 consumption of Rs13.7bn was at 66% of previous year levels and up 192% QoQ. Consumption in Dec-20 was ~Rs5bn and at the same level as Nov-20 and at 70% of Dec-19 levels driven by increase in mall operating hours, resumption of F&B and gaming zones/multiplexes. Retail rental collections (including CAMs) in Q3FY21 were also healthy at Rs2.6bn (Rs3.9bn for 9MFY21). We now build in a lower rental income loss of 45% or Rs4.5bn in FY21E vs. 50% earlier and expect mall rentals to revert back to 90% minimum guarantee from Q1FY22 as consumption stabilises.

- Estimated rental income CAGR of 14% over FY20-25E: At a portfolio level, PHNX will have ~11msf operational mall space by FY23-24E (6.9msf currently operational including Palassio, Lucknow). After accounting for COVID-19 induced revenue loss of Rs4.5bn in FY21, we expect PHNX to achieve a 14% rental income CAGR (ex-CAM) at a portfolio level over FY20-25E which may result in PHNX clocking Rs19.5bn of rental income in FY25E vs. ~Rs10bn in FY20. Of the Rs19.5bn of estimated gross rental income in FY25E, PHNX share is ~75% or Rs14.7bn.

- Potential fund infusion may usher in growth: The company has recently signed a non-binding term sheet with GIC Private Equity (PE) for the formation of a retail-led mixed-use platform. The assets include PHNX's Mumbai (Kurla) and Pune malls and Mumbai (Kurla) offices having a total leasable area of 3.36msf (2.33msf of malls and 1.03msf of offices) that generated FY20 NOI of Rs3.7bn. The indicative pre-money EV for these assets is Rs56-57bn or an equity value of Rs40-41bn (debt of Rs16bn as of Mar-20). Subject to the deal going through, GIC PE may invest between Rs10-13bn in PHNX's SPVs which may further strengthen PHNX's balance sheet as it has estimated cash reserves of Rs16bn as of Dec-20.

Shares of The Phoenix Mills Ltd was last trading in BSE at Rs.790.8 as compared to the previous close of Rs. 753.4. The total number of shares traded during the day was 35795 in over 2346 trades.

The stock hit an intraday high of Rs. 819 and intraday low of 763.25. The net turnover during the day was Rs. 28533587.

Source : Equity Bulls

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