Phoenix Mills Shares Jump As Deals With GIC, CPPIB Boost Liquidity
Shares of Phoenix Mills Ltd. rose to their highest in four months as analysts said that the mall developer's deals with Singapore’s GIC and Canada Pension Plan Investment Board will provide growth capital.
Phoenix and GIC will jointly develop a retail‐led mixed‐use investment platform in India. The Singaporean sovereign wealth fund's subsidiaries will invest Rs 1,510 crore in two tranches in Phoenix Mills' arms and will acquire a significant minority stake in the joint venture, valued at around Rs 5,600 crore, the company said in an exchange filing. The platform includes Phoenix Mills' prime malls and commercial assets in Pune and Mumbai.
The Canada Pension Plan Investment Board proposed to invest Rs 384 crore in two tranches for a 49% equity stake in Phoenix's subsidiary Mindstone Mall Developers Pvt. to build a new asset in Kolkata.
Shares of Phoenix Mills jumped as much as 8.5% to hit Rs 875.95 before paring gains. Trading volume for the stock surged to 10 times the 20-day average for this time of day. The relative strength index on the stock was above 70, indicating it may be overbought.
Of the 20 analysts tracking the stock, 19 have a ‘buy’ rating, and one suggests ‘sell’, according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 4.7%.
Here's what brokerages made of Phoenix Mills' deals:
Maintained a 'buy' rating with an unchanged target price of Rs 1,026 per share, implying an upside of about 19%.
Phoenix Mills’ deals with GIC and Canada Pension Plan Investment Board provide ammunition for growth during the current Covid-19 wave.
The real-estate developer is expected to have around Rs 2,500 crore worth of liquidity in the first half of FY22 as its deals materialise.
With March 2021 liquidity of Rs 1,030 crore and potential fund infusion of Rs 1,510 crore from GIC and Rs 960 crore from CPPIB (current and previous projects), Phoenix is building a war chest for growth.
Key risks are Covid resurgence impacting mall consumption and dragging down occupancies and rentals.
Maintained 'accumulate' rating, raising the target price to Rs 777--that still implies a potential downside of 3.6%
Phoenix Malls is building a war chest for attractive acquisitions
GIC and Phoenix Mills may consider various options to monetise the investment platform, including by way of a REIT, over a three to the five‐year period from the closing of this transaction.
Upgraded from 'outperform' to 'buy', raising the target price to Rs 970, an upside potential of 20%.
Phoenix Mills' Rs 3,500 crore cash will allow it to complete its under-construction projects and also build a war-chest for acquisitions.
Back-to-back deals with CPPIB and GIC amid the current lockdown (malls remain shut) emphasises the resilience of its business in the long term.
With these deals, Phoenix has de-risked its business and lowered its dependence on debt amid the pandemic uncertainty.
The company remains one of the best Covid-19 recovery plays as it showed a V-shaped recovery following easing after the first wave.
Maintain a positive outlook on malls in the long term as India’s lack of social infrastructure (parks, museums, etc.) in major cities means its malls are likely to remain popular destinations in a post-pandemic world.