Having risen over 31,000% in this millennium, analysts give this mall developer top billing

Placing a positive bet on Phoenix Mills, which has risen 31,111 percent between January 3, 2000 and April 18, 2018, brokerage house Motilal Oswal has initiated coverage on the stock. Motilal Oswal has a buy call on the stock, with an upside potential of 21 percent at a target of Rs 732.

In fact, in the last two months, global brokerages have been positive on the stock as well.

For instance, Macquarie maintained an outperform rating on the stock, with a target of Rs 732. This was based on reports of the company having inked an agreement to buy 16 acres of land near Bengaluru and observed that catchment for a mall was good. It also said that Phoenix was one of its top picks in realty space.

Meanwhile, JPMorgan, too, maintained the overweight stance and raised target to Rs 710. Double rental growth combined with residential business to boost earnings, it said, adding that it sees 12/35 percent EBITDA/net profit growth over two years. In fact, it expects positive free cash flow from FY19.

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It must be prudent to point out that the stock has witnessed two three rounds of corporate action in terms of stock splits and bonuses. The company had announced a bonus issue of 4:1 on September 1, 2005 and announced two stock splits September 1, 2005 and December 12, 2005.

The company, as such, has been in operation for more than 100 years. It started off as a textile manufacturer, but has of late been in the business of mall developments.

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Motilal Oswal house highlighted three aspects of its portfolio

(a) Retail mall development (enjoys a leadership position in cities where it operates)

(b) Hospitality, Residential and Commercial (together contributed 35% of revenue as of

FY17).

Further, it also highlighted that it has become a partner of choice for retailers in India due to its impressive track record of consumption-led growth and strong portfolio of eight malls (6msf) spread across the top cities in India.

It also specializes in mall management, a segment where rivals are seen lagging. Thus, we believe that it offers a unique opportunity for any retailer (both domestic and global) looking to expand rapidly in India, the brokerage house said in its report.

Fund infusion

Motilal Oswal said that the fund infusion of Rs 1,660 crore by Canadian Pension Plan Investment Board (CPPIB) in its subsidiary, Island Star Developers, will create a war chse of Rs 3,200 crore. This will gear up the company for next leg of growth and Phoenix plans to buy and build four new malls.

Cash flows

The brokerage also expects cash flow generation from operations of Rs 2,380 crore over FY18-20. These cash flows can be deployed toward (i) acquiring ready/under-construction mall, (ii) unlocking development potential of 4.6msf in its existing land parcels and (iii) reducing debt, the brokerage added.

In terms of financials, it expects the company to record CAGR of 15 percent in revenue, 16 percent in EBITDA and 37 percent in PAT.