Report

MOSL: PHOENIX MILLS (INITIATING COVERAGE)-The Specialist-Carving a niche by tapping the untapped

Phoenix Mills (initiating coverage): The Specialist; Carving a niche by tapping the untapped

(PHNX IN, Mkt Cap USD1.4b, INR606, TP INR732, 21% Upside, Buy)

 

Phoenix Mills (PHNX) has an operational history of more than 100 years. A textile manufacturer at inception, the company has reinvented itself as a retail-led mixed-use mall developer. Its diversified portfolio of businesses comprises: (a) Retail mall development (enjoys a leadership position in cities where it operates) and (b) Hospitality, Residential and Commercial (together contributed 35% of revenue as of FY17).

  • PHNX - a pioneer in developing and operating malls - has become a partner of choice for retailers in India due to its impressive track record of consumption-led growth and strong portfolio of eight malls (6msf) spread across the top cities in India. This apart, the company specializes in mall management, an area where its competitors lag. Thus, we believe that it offers a unique opportunity for any retailer (both domestic and global) looking to expand rapidly in India. All this makes PHNX a 'specialist' play on India's promising consumption growth story, in our view.
  • CPPIB has recently infused equity capital of INR16.6b (in tranches) in its subsidiary, Island Star Developers, and with leverage of 1:1, it will create a war chest of INR32b, gearing up the company for the next leg of growth. PHNX plans to acquire and build up to four new malls.
  • We expect PHNX to generate cash flows from operations of INR23.8b over FY18-20. These cash flows can be deployed toward (i) acquiring ready/under-construction mall, (ii) unlocking development potential of 4.6msf in its existing land parcels and (iii) reducing debt.
Underlying
Phoenix Mills

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.

Provider
Motilal Oswal
Motilal Oswal

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