Lippo Malls Indonesia Retail Trust
Hit by Unfavourable Currency Movement
Intrinsic Value S$0.620
Prev Closing Price S$0.445
Lippo Malls Indonesia Retail Trust (LMIR) recorded a 13.6% YoY increase in 3Q gross revenue and 19.2% YoY increase in DPU to S$39.0m and 0.87 S cent respectively. This set of results is slightly weaker than our previous estimates mainly due to the continuous weakening of IDR against SGD. 9M revenue and DPU formed 74.1% of our previous estimates.
The declining IDR also led to a 14.6% QoQ fall in investment properties to S$1.51bn. However, the trend has ceased for more than a month and LMIR’s total debt/total asset remained at a comfortable level of 27.7%.
We are lowering our FY13 and FY14 forecasts to take into account the weaker IDR. However, we expect FY14 numbers to be strong in view of new acquisitions. Maintain Increase Exposure with an intrinsic value of S$0.620.
Results Summary: Portfolio occupancy rate remained stable QoQ at 95.1%. Improved utilization rate at Plaza Medan Fair and Kramat Jati Indah mitigated the drop at Ekalokasari Plaza, which is undergoing AEI development. LMIR also achieved 27.1% rental reversion this quarter for new/renewed leases. Management commented that the high renewal was primarily due to an anchor tenant at Pluit Village whose rent rose by about 54% over preceding period.
The increase in 3Q revenue was mainly led by contribution from the new malls and positive rental reversion from the existing malls. Comparing QoQ, gross revenue declined 7.3% over the period mainly due to weaker IDR against SGD. Operating expenses rose at about the same rate as revenue while financial expenses grew at a faster 26.8% YoY to S$7.5m mainly due to currency options which LMIR entered into in June 2013. Consequently, total return for the period after tax increased by 14.2% YoY to S$24.2m.
Cash flow from operating activities remained stable at S$24.7m and the company declared dividend of 0.87 S cent per unit.
Company Update: LMIR’s investment properties fell by 14.6% QoQ to S$1.51bn mainly due to the depreciation of IDR against SGD - the currency pair has weakened by a similar percentage over between end June and end Sep period. However, the trend has ceased over the past one month and is likely to remain stable till early 2014. For now, gross debt/ total asset stood at 27.7%.
At the same time, one of its loan facilities amounting to S$147.5m will mature in June 2014. The trust is currently in talks to renew the loans. LMIR also recently issued S$150m of MTN notes which can be used to replace the maturing loan or for expansion purposes. We see this as a cautious move by the management to lock-in the borrowing fees.
LMIR is continuously looking for new assets and we believe some of them are at the advanced stage of negotiations, which explains the S$150m MTN notes issuance. However, the due diligence and paper work may take a longer than expected.
Forecast and Valuation: We are lowering our FY13 and FY14 estimates to take into account the weaker IDR. However, for FY14, we adopted a more aggressive stance as we expect the company to acquire new assets over the next few months. Maintain Increase Exposure with an intrinsic value of S$0.620.
Publish date: 08/11/13