Accumulate Phoenix Mills; target of Rs 221: Emkay

Emkay Global Financial Services is bullish on Phoenix Mills (PML) and has recommended accumulate rating on the stock with a target of Rs 221, in its August 1, 2012 research report.

“PML reported topline in-line to our estimates of Rs 531mn after adjusting the electricity charges which are not routed through the P&L. EBITDA at Rs 394mn was 4.9% above our estimated mainly due to lower than estimated advertisement costs. PAT at Rs 306mn was 16.1% above estimate due to higher EBITDA and lower financial costs. PAT grew by 12.3% YoY and 11.9% QoQ. SA debt decreased marginally by Rs 60mn to Rs 2.94bn QoQ. On operations side, Landmark’s 41,000 sf leased area is still not earnings rentals as it is under renovation while occupancy levels at Palladium Annex (16000 sf) increases to 70% earning rentals in range of Rs 400-500/sf. There is no significant area coming under renewals in next quarter.”

“Although areas across operational three MC projects are leased in range of 80-90%, the occupancy ramp-up in the assets have been disappointing. MC Mumbai occupancy increased to 59% from 50% QoQ but it is still lower after full two quarters of operations. MC Bangalore and MC Pune didn’t see any significant ramp-up QoQ. PVR, the anchor tenant across all these assets is working on fit-outs, whose commencement of operation will increase the occupancy by 8-9%.”

“PML is developing 3 commercial assets in Kurla through its 2 subsidiaries- Offbeat Developers (MC Mumbai) and Phoenix Hospitality. Of the total saleable area of 1.5msf company had sold 0.25msf in Q4FY12 which increased to 0.62msf in Q1FY13, of which 0.52msf is part of MC Mumbai. This sale is the first step towards debt reduction in the SPV which will eventually create more value for equity investors in the asset. Shangri La Hotel project, on other hand, sees increase in development cost to Rs 10.1bn from earlier budgeted Rs 8.35bn. Higher cost of imports due to rupee depreciation, interest cost capitalization and increase in construction expenses are the cited reasons," says Emkay Global Financial Services research report.

Non-Institutions holding more than 90% in Indian cos

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