Bullish on ENIL, Phoenix Mills: Sharyans Wealth Management

Lancelot D'Cunha, CEO, Sharyans Wealth Management Pvt Ltd is bullish on Entertainment Network India (ENIL) and Phoenix Mills.

Check out: What are Rajesh Jain's picks to play Below is a verbatim transcript of his interview with CNBCTV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video. Q: We understand that one of your buys is Entertainment Network India (ENIL). Why are you bullish on that stock? A: Recently, the Supreme Court had announced its decision on the royalty issue. Royalty is now fixed at just 2% of the revenues. This has a major impact on the profitability of the company. We have seen that earnings before interest, taxes, depreciation and amortisation (EBITDA) has improved from 26% in March 2010. We expect it to go upto about 43% over the next two years. I have seen ad rates climb up 37% this year from April 1, 2010. I see this trend continuing over the next year, increasing consumption and ad spending by industry, especially on the consumption led companies. So, with phase III now getting cleared, you will start seeing a lot of traction because the entire investment that is put in is actually going to be geared up for phase III with very marginal incremental cost. So, I feel that given this future that we are seeing in the radio industry, this is a good long-term bet. It is presently trading at about eight times its FY12 EBITDA which is fairly low, when compared to the international peers, which are at about 12 times the EBITDA. So, this is a good story which one can accumulate on declines. Q: You are also bullish on Phoenix Mills. Do you think the cash generation from High Street Phoenix is going to help that company? A: Real estate has been beaten down and no one is really looking at real estate stocks. But here is the real estate story that can unfold into something very substantial over the next year or so. Phoenix Mills has just completed its expansion in the present High Street Phoenix and this year will generate about Rs 240 crore of rentals with a very high EBITDA margin. The EBITDA will be around Rs 160 crore because the expenditure is practically written off. The other important thing in Phoenix Mills is that it had two market cities which are actually coming on line, on stream, during this year. It will add another 1.6 million sq. feet of saleable area during this financial year, the coming year and that will actually add to the profits. On a sum of parts basis, when you take the various market cities that Phoenix Mills is putting up over the country, we find a value of about Rs 4,400 crore as against the marketcap of Rs 2,900 crore. So, there is a reasonable good valuation story here which one can invest in. Q: Do you have any exposures in the stocks? A: Yes, in both the stocks I have exposures. Also, our clients have exposures in these stocks.