Retail consumption in malls run by Phoenix Mills Ltd remained steady in February, though not particularly exciting. Month-on-month, overall consumption declined by 21% in February due to seasonal factors such as lower number of operating days, lack of festivals and the end of the holiday season.
On a like-to-like basis, last month’s consumption was 110% of February 2020 (pre-Covid level). This does not include the contributions of Phoenix Palacio and Phoenix Citadel, which were due to open in July 2020 and December 2022, respectively. Year-on-year (April to February), like-for-like consumption stood at 114% of FY20 levels. In view of this, for FY23, ICICI Securities pencils in rental income 1,340 crore (or 1,200 crore on a like-to-like basis) Vs. 1,030 crore in FY20.
Whenever Phoenix adds a mall to its portfolio, it should help drive consumption going forward. Last month, the company’s Palladium Mall in Ahmedabad commenced operations. In addition, two malls in Pune and Bengaluru are expected to be operational in the June quarter (Q1FY24). By FY27, Phoenix’s retail space is expected to be around 14 million sq ft (msf), up from 6.9msf in FY22. ICICI Securities expects Phoenix to achieve 17% compound annual growth rate (ex-new Kolkata property) in rental income in FY 20-25E, resulting in 2,240 crore of rental income in FY25E. Of this, the share of Phoenix is about 77% or 1,730 crore, ICICI Securities said.
The retail business is Phoenix’s mainstay, contributing 68% of revenue for the nine months ended December. The company also derives revenue from residential, commercial, hospitality and others. Phoenix’s hospitality segment has been strong this year. Higher room rates are a factor helping the segment’s performance. The St. Regis of Phoenix, Mumbai sees a sharp 23% month-on-month jump in revenue per available room in February 18,180. The occupancy rate increased from 83% to 89% in January. Courtyard by Marriott, Agra also saw a gradual improvement in room occupancy and revenue. Nuwama Research expects consumption in malls and hotel occupancies, and improvement in liquidation of finished inventory in the housing segment, to result in stronger cash flows for Phoenix Mills.
To be sure, a slowdown in consumption is a near-term risk for the stock, which is down about 19% from its 52-week high seen in November. “Entry in new cities and operationalization of under construction/planned properties are some of the stock triggers that are expected to play out over the next few years,” Nuwama Research analysts said in a report on March 8.
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