Q2FY24 Review: Nexus Select Trust: Strong and in-line performance

9 Nov 2023 , 11:21 AM

Nexus reported its maiden distribution of Rs2.98/unit, in-line with its annualised guidance of ~Rs8/unit for FY24. Operationally, it reported another strong quarter of consumption growth at 18% YoY, with strong growth across key malls like Select City walk and the Prestige portfolio. The momentum has, so far, sustained in Q3FY24 as well. With Occupancy now near optimum levels, Nexus will focus on bringing in premium brands and achieving higher releasing spreads. Nexus has identified 1msf of retail assets in South for acquisition, and re-iterated will be value accretive for REIT. Analysts of IIFL Capital Services retain their estimates and BUY rating with TP of Rs135. 

Q2 performance robust; announces maiden distribution: 

Nexus reported a distribution of Rs2.98/unit for a period of 19th May (listing date) to end September (1.5 quarters); with 62% paid out as dividend and 10% as amortisation of SPV debt (cumulatively 72% is tax free) and remaining as Interest. Nexus reported 18% growth in consumption with ~30% YoY growth in Select City walk and strong growth in occupancy for the Prestige portfolio. NOI was up 17% YoY for Q2, H1FY24 NOI is broadly in line with FY24 projections by the REIT. Nexus has also maintained its balance sheet with LTV of 14% with a blended interest cost of 8.3%. 

Healthy near term outlook: 

Mgmt shared that the Nexus malls have been outperforming its peers in competing markets like Bangalore, Mumbai, Chennai and Pune by clocking in double digit growth vs industry growing in single digits. With occupancy already at 97%/95% (leasing/trading occupancy respectively), Nexus is focusing on premiumisation of its brand mix. Further, with ~10% of area coming up for re-leasing every year, the spreads are expected to be healthy >20% aiding further NOI growth. 

Looking to acquire 1msf of retail malls; retain BUY: 

Nexus shared that it has signed a non-binding agreement to add 1msf of mall retail space across 3 malls in South India. While it did not share further details, these malls fit into Nexus strategy of buying under invested assets, probably not be fully leased out and have potential for a turnaround. Mgmt continues to outline that it has a healthy pipeline, and is likely to continue delivering superior consumption growth, driven by operational turnaround as the ongoing theme. BUY with total return of >15%.