Phoenix Mills (PHNX) reported a 4% QoQ increase in its Q4FY11 revenue to Rs468mn which is in line with our estimates. PAT increased by 14.3% QoQ to Rs272mn on account of rise in other income. Other income increased by 98% sequentially to Rs141mn on account of a one off transaction of TDR arbitrage sale where PML made a profit of Rs90mn. We see the following near-term triggers for the stock: (i) Commencement of Pune Market City Project by May’11 end and Kurla and Bengaluru by Q2FY12 end. (ii) Commencement of the first phase of Shangri-La Hotel in Q3FY12. (iii) HSP-Phase IV, although at present (0.25 msf) gives a strong delta to the co's valuation, may add significant upside to valuation if company manages to get the hospitality FSI (5x). We maintain a BUY rating with a target price of Rs240.

Opening of new stores drive revenue: Revenue increased by 36% YoY and 4% QoQ to Rs468mn. Incremental sequential revenues were driven by opening of new stores like Timberland, California Pizza Kitchen Paul& Shark, Aldo, Canon and Remanika and also on account of higher revenue from revenue share over and above the fixed minimum rental.

Improvement in other income buoys PAT: PHNX's average rentals for HSP increased to Rs165psf in Q4FY11, marginally higher than the last quarter and up 10.5% YoY. PAT increased by 14.3% QoQ to Rs 272mn on account of rise in other income. Other income jumped by 98% sequentially to Rs141mn as against Rs71mn on account of interest income from investment and one off transaction of TDR arbitrage where PML made a profit of Rs90mn.

Market City Status: Market City projects at Pune is in the final stages of completion and would generate rentals from June'11 onwards for 150 retailers (out of 270 retailers) and rest of the retailers will follow soon in the later months. Kurla and Bangalore Market city projects are being delayed from our estimated time and now are likely to be operational by end of Q2FY12. Leasing status for Market City Projects has improved further (see next page) and we expect further leasing out only after malls come into operation. PHNX has increased its stake in the Bengaluru project in two tranches to 37.8% (at equity valuation of Rs1750mn and Rs1950mn) by paying amount of Rs104mn which in our opinion is value-accretive.