Buy Phoenix Mills; target of Rs 795: ICICI Direct

ICICI Direct's research report on Phoenix Mills

Phoenix Mills (PML) has entered into a non-binding term sheet with GIC affiliates for a strategic retail led mixed use development platform. PML will contribute Phoenix Marketcity Mumbai, Phoenix Marketcity Pune, Art Guild House (office), Phoenix Paragon Plaza (office) and Centrium Mumbai (office) as a part of the platform. GIC, on the other hand, will invest by way of a combination of primary infusion and secondary purchase of equity shares for a 26% stake initially at an enterprise value of ~Rs 5600-5700 crore.

Outlook

We maintain BUY rating with a revised SoTP based target price of Rs 795/share. The lower implied cap rate in the deal prompts us to reduce our cap rate estimates of 8% (for operational assets) vs. 8.5%, earlier, resulting in a target price hike.