Lippo Malls Indonesia Retail Trust -
PRICE as of 21 Nov 2013 SGD 0.43
PRICE TARGET SGD 0.48
SGD 250mn war chest for acquisitions
■ Lippo Malls Indonesia Retail Trust (LMRT) raised SGD 100mn through a private placement.
■ Together with a SGD 150mn MTN issuance in October 2013, it now has SGD 250mn to finance future acquisitions.
■ The lower-than-expected amount of equity raised at a higher-than-expected issue price adds 4% to our price target.
■ We maintain our Outperform rating with a revised SGD 0.48 price target.
Equity issuance, as expected
LMRT has raised SGD 100mn via a private placement at SGD 0.405/unit, a 5.8% discount to the preannouncement SGD 0.43 price and a 10% discount to its 30 September 2013 SGD 0.45 NAV. Management said proceeds could be used to finance asset enhancements, acquisitions or to pay down debt. In October, LMRT had issued three-year SGD 150mn notes under its MTN programme, priced at 4.25%.
But at lower quantum and at better pricing
We had expected LMRT to make SGD 350mn of acquisitions at an 8% initial yield using 60% equity funding at SGD 0.38. We now expect LMRT to make just SGD 250mn of acquisitions, implying 40% equity funding. We expect leverage to rise to 30% post-acquisitions from 28% as of 30 September 2013. Management‟s medium-term leverage target is 30%. We revise our 2013-16E earnings estimates by -2% to +4% and raise our price target by 4% to SGD 0.48 from SGD 0.46.
Acquisitions could be a mix of sponsor and third-party assets
LMRT aims to expand its portfolio to SGD 4bn in the next three-tofive years (from SGD 1.51bn currently) via sponsor and third-party assets. Potential targets could include the parent‟s Lippo Mall Kemang, part of its Kemang Village development in South Jakarta. The 55,000 sqm NLA mall was completed in 2012
We like LMRT‟s low beta and high-yield exposure to Indonesian consumption. LMRT trades at an 8.2% 2014E yield and 0.95x P/NAV. Our price target is DDM-derived, using a 3.00% risk-free rate, 0.9 beta, 6.5% market risk premium and 0.25% terminal growth.
Publish date: 21/11/13