Moneycontrol PRO
Check Credit Score
Check Credit Score
HomeNewsBusinessStocks

Phoenix Mills doubles investors' wealth in 5 years; brokerages expect further growth

Brokerages see up to 35 percent upside in the stock in the next 12 months on the back of a diversified portfolio, sound balance sheet, a solid track record going back two decades and healthy income profile

June 26, 2019 / 02:45 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

In the last five years, Phoenix Mills (PML) has rallied to double the investors' wealth. In comparison, the realty sector index has returned a paltry 5 percent in the same period.

Despite the surge, PML's growth run is far from over. Analysts expect the stock to grow further in the next 12 months riding on a diversified portfolio, sound balance sheet, solid track record going back two decades and a healthy income profile of its retail malls.

Although the company is the largest retail mall operator in the country, it has a diversified portfolio of retail, office and residential assets.

Currently, PML is operating eight retail malls in six cities, five office assets in Mumbai and Pune, and two 5-star hotels in Mumbai and Agra.

Additionally, Phoenix Mills also has a 3.72 million sq. ft portfolio of residential assets in Bengaluru, of which 2.53 million sq. ft has been launched for sales and 2 million sq. ft has already been sold.

The company also plans to add another 4.90 million sq. ft of mall space in five different cities along with 0.96 million sq. ft of office space.

According to Antique Stock Broking, all malls except Palladium in Chennai, which started operation in FY19, are mature and stable with trading occupancy of more than 95 percent and a healthy trading density ranging from Rs 1,174-2,943 per sq. ft per month.

The brokerage house expects the rental income to further increase as much as 50 percent as leasable areas are up for lease renewal in the next three years.

"The eight operating retail malls (5.9 million sq. ft) are generating income (EBITDA) of more than Rs 900 crore annually," said Antique Stock Broking.

Phoenix Mills will add another 0.9 million sq. ft of mall space in Lucknow by the second half of FY20. This will add another Rs 100 crore once the asset stabilises.

As per financial services company HSBC, the mall business of PML will catapult the company's share to about Rs 870 from its current market price of Rs 645.85, as on June 25.

"The next leg of growth will be driven by premiumisation and mall additions," HSBC said.

Apart from a robust portfolio and a strengthening mall business, Phoenix Mills is acing the financials too. While the debt-equity ratio of PML has steadily decreased from 1.79 in FY17 to 1.15 in FY19, the interest coverage ratio across the assets has steadily improved from 1.45 to 2.49 in the same period.

About 90 percent of the company's debt is long-term in nature with modest maturity of Rs 300-500 crore per year for the next three years.

"The cashflow from retails assets alone (Rs 900-1,000 crore) is adequate to service the debt, cover the interest cost of the entire group (Rs 350 -400 crore) and tax expenses (Rs 100-125 crore) leaving with free cashflow of nearly Rs 400-500 bn annually to repay the debt and fuel further growth," said Antique.

Over the last three decades, Phoenix Mills has risen to become the go-to destination for retailers and consumers, said the brokerage house. About 78 percent of its total annuity income, which contributes to 81 percent of its revenues, comes from the retail business of the company.

The stock of Phoenix Mills last closed at Rs 645.85 on June 25, 2019.

Brokerage calls:

Antique Stock Broking: Buy | Target: Rs 800.

Axis Direct: Buy | Target: Rs 779.

Motilal Oswal: Buy | Target: Rs 785.

HSBC: Buy | Target: Rs 870 (raised from Rs 800 earlier).

ICICI Securities: Buy | Target: Rs 772

Disclaimer: The views and investment tips expressed by brokerages on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Suyash Maheshwari
first published: Jun 26, 2019 12:55 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347