MOSL: Phoenix Mills (Buy) - Revenue/EBITDA in-line - PAT exceeds estimates - Renewals to drive rentals growth
Phoenix Mills: Revenue/EBITDA in-line; PAT exceeds estimates; Renewals to drive rentals growth
(phnx IN, Mkt Cap USD1.5b, CMP INR616, TP INR737, 20% Upside, Buy)
- Revenue/EBITDA in-line; PAT exceeds estimates: PHNX’s revenue declined 4% YoY to INR4,366m (est. of INR4,410m) in 4QFY18 due to reclassification of its subsidiary. Thus, on a like-to-like (L2L) basis, revenue was up 9% YoY to INR4,962m. EBITDA margin expanded 550bp YoY to 49.5% (est. of 48.7%). PAT rose 102% YoY to INR1,037m, higher than our estimate of INR690m due to lower tax and interest. For FY18, revenue fell 11% to INR16.2b (+1% on L2L basis), EBITDA margin expanded 150bp to 48% and PAT grew 28% to INR2.6b.
- Renewals across its malls to drive rental growth: In FY18, 12% of HSP mall’s area was replaced by 13 new stores, which began operations in December 2017, leading to an increase in rental psf per month by 18% YoY to INR369. This is attributable to PHNX’s ability to alter its tenant mix and drive rental growth from existing assets. With some renewals lined up over the next three years, we expect PHNX’s rentals to grow at a 15% CAGR over the next three years by scaling occupancy and psf rentals. Rental growth would be mainly aided by higher rentals in the HSP mall, where ~20% area is due for renewal every year.
The Phoenix Mills Limited is an India-based company engaged in the construction of buildings carried out on own-account basis or on a fee or contract basis. The Company is engaged in the development and operation of malls and other real estate properties. It operates through twos segments: Property & Related Services, and Hospitality Services. It specializes in the ownership, management and development of retail-led mixed use properties that include shopping, entertainment, commercial, residential and hospitality assets, aggregating approximately 17.5 million square feet over 100 acres. Its core business includes Retail, Hospitality, Commercial and Residential. Under the Retail segment, it operates seven malls in six cities. Under Commercial and Hospitality segments, it operates five commercial centers in two cities and two completed hotel projects. The upscale mall houses various international brands, such as Gucci, Jimmy Choo, Bottega Veneta and Ermenegildo Zegna, among others.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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