Lippo Malls Indonesia Retail Trust

OCBC on 2 May 2012

Lippo Malls Indonesia Retail Trust’s (LMIRT) 1Q12 DPU was slightly lower than expected at 0.69 S cents (18.6% of our FY12F DPU), due to higher tax expenses and one-off charges of ~S1.7m. However, LMIRT’s fundamentals remain strong, with portfolio occupancy holding steady at 94.5% (94.1% in prior quarter), well above Indonesia’s retail industry average occupancy rate of ~87.6%. According to management, its malls have been seeing strong interest by international and local retailers, while shopper traffic has been rising amid strong domestic consumption. LMIRT also reiterated that Jakarta remains ‘under-shopped’, as evidenced by its low retail density of 0.4 sqm per person. Hence, it is confident that its retail malls are well positioned to benefit from the burgeoning Indonesian retail industry. We now revise our FY12-13 forecasts to factor in the 1Q results. Accordingly, our fair value eases slightly from S$0.45 to S$0.43. Maintain BUY.

NPI boosted by newly acquired retail malls
Lippo Malls Indonesia Retail Trust’s (LMIRT) 1Q12 gross revenue of S$45.6m (+39.0 YoY) and NPI of S$30.9m (+38.0% YoY) were in line with our expectations, meeting 25.1-25.6% of our full-year estimates. The strong performance was primarily driven by a full-quarter contribution of the two retail malls that were acquired in 4Q11. Distributable income, however, was slightly lower than expected at S$15.0m, due to higher tax expenses and one-off charges of ~S1.7m associated with the refinancing and acquisition activities in prior quarter. As a result, DPU for the quarter registered 0.69 S cents, forming 18.6% of our FY12F DPU (20.9% of consensus). This is lower than the DPU of 1.17 S cents seen a year ago due to a 1-for-1 rights issue in 4Q11, but represents a significant QoQ improvement of 30.2%. The DPU will be payable on 24 May.

Positive outlook
As at 31 Mar, LMIRT’s portfolio occupancy had remained steady at 94.5% (94.1% in prior quarter). This is well above Indonesia’s retail industry average occupancy rate of ~87.6%. According to management, its malls have been seeing strong interest by international and local retailers, while shopper traffic has been rising amid strong domestic consumption. LMIRT also reiterated that Jakarta remains ‘under-shopped’, as evidenced by its low retail density of 0.4 sqm per person relative to 0.7 sqm in Singapore and 2.7 sqm in Kuala Lumpur. Hence, it is confident that its retail malls are well positioned to benefit from the burgeoning Indonesian retail industry.

Maintain BUY; but lowering fair value from S$0.45 to S$0.43
LMIRT’s aggregate leverage was slightly up from 8.7% in 31 Dec to 9.2%, largely due to a 5.0% QoQ decline in investment properties resulting from the effect of forex rate changes. However, its financial position is still strong in our view, with no refinancing needs until Jun 2014. We now revise our FY12-13 forecasts to factor in the 1Q results. Accordingly, our fair value eases slightly from S$0.45 to S$0.43. Maintain BUY on LMIRT, as we are still looking at favourable total expected return of 13.3%.