Buy Nexus Select Trust; target of Rs 135: ICICI Securities

ICICI Securities research report on Nexus Select Trust

Nexus REIT clocked 18% LTL (like-to-like) consumption growth across its urban consumption centres (malls) in Q1FY24 with footfalls up 10% YoY and balance growth from high spend per customer. We expect Nexus’ NOI CAGR of 10.4% over FY23-26E to INR18.8bn on expected ramp-up in occupancies in existing assets, annual rental escalations and mark-up of leases that are expiring.

Outlook

Retain BUY with Mar’24E DCF-based TP of INR135/share (earlier INR 126) assuming lower cap rate of 7% (earlier 7.5%) given strong consumption growth. At CMP, we expect NDCF distribution yield of 6.5% in FY24E, 7.0% in FY25E and 7.5% in FY26E. We expect ~65-70% of distribution to be in the form of dividends/principal repayments that are tax free. Key risk: Slowdown in consumption / fall in occupancies and rentals.