Lippo Malls Indonesia Retail Trust (LMIRT) reported its 4Q14 results which met the street’s expectations. Gross revenue rose 6.2% YoY to S$36.0m due largely to positive rental reversions. DPU jumped 26.8% to 0.71 S cents. However, gross revenue and DPU for FY14 dipped 10.2% and 15.1% to S$137.0m and 2.76 S cents, respectively, underpinned by the weaker IDR versus the SGD and a lower NPI margin of 92.0% (FY13: 93.9%). During 4Q14 and FY14, LMIRT achieved healthy average rental reversions of 10.8% and 10.4%, respectively, aided by favourable demand and supply dynamics. Management has currently hedged ~67% of its estimated net cash flows. It plans to increase this hedge ratio to at least 90%. Following a change in analyst coverage and taking into account a larger unit base, we pare our FY15 DPU projection by 4.7%. Our DDM-derived fair value estimate is lowered from S$0.37 to S$0.35. Maintain HOLD.
4Q14 results within the street’s expectations
Lippo Malls Indonesia Retail Trust (LMIRT) reported its 4Q14 results which met the street’s expectations. Gross revenue rose 6.2% YoY to S$36.0m due largely to positive rental reversions. DPU jumped 26.8% to 0.71 S cents. However, gross revenue and DPU for FY14 dipped 10.2% and 15.1% to S$137.0m and 2.76 S cents, respectively, underpinned by the weaker IDR versus the SGD and a lower NPI margin of 92.0% (FY13: 93.9%). Full year revenue and DPU constituted 100% and 98.6% of Bloomberg consensus’ estimates, respectively. Based on its last closing price, LMIRT’s FY14 distribution yield was 7.8%.
Robust rental reversions, but exposure to IDR remains
During 4Q14 and FY14, LMIRT achieved healthy average rental reversions of 10.8% and 10.4%, respectively, aided by favourable demand and supply dynamics. Looking ahead, LMIRT believes the outlook for quality retail spaces in Indonesia is promising in the next 12 months as both local and foreign retail players continue to remain active. Management has currently hedged ~67% of its estimated net cash flows. It plans to increase this hedge ratio to at least 90% and is also looking at putting in place hedges for two years instead of one, given the expected continued volatility in the IDR.
Maintain HOLD
In terms of financial position, LMIRT’s gearing stood at 31.3% as at 31 Dec 2014. It has ~S$200m worth of debt maturing in Jul this year, and management is seeking to refinance this, likely with another bond issuance. LMIRT is hopeful of obtaining a lower interest rate for this refinancing exercise. Following a change in analyst coverage and taking into account a larger unit base, we pare our FY15 DPU projection by 4.7%. Our DDM-derived fair value estimate is lowered from S$0.37 to S$0.35. Although LMIRT offers a decent FY15F distribution yield of 8.5%, we are maintaining our HOLD rating as we see limited total returns ahead.
Lippo Malls Indonesia Retail Trust (LMIRT) reported its 4Q14 results which met the street’s expectations. Gross revenue rose 6.2% YoY to S$36.0m due largely to positive rental reversions. DPU jumped 26.8% to 0.71 S cents. However, gross revenue and DPU for FY14 dipped 10.2% and 15.1% to S$137.0m and 2.76 S cents, respectively, underpinned by the weaker IDR versus the SGD and a lower NPI margin of 92.0% (FY13: 93.9%). Full year revenue and DPU constituted 100% and 98.6% of Bloomberg consensus’ estimates, respectively. Based on its last closing price, LMIRT’s FY14 distribution yield was 7.8%.
Robust rental reversions, but exposure to IDR remains
During 4Q14 and FY14, LMIRT achieved healthy average rental reversions of 10.8% and 10.4%, respectively, aided by favourable demand and supply dynamics. Looking ahead, LMIRT believes the outlook for quality retail spaces in Indonesia is promising in the next 12 months as both local and foreign retail players continue to remain active. Management has currently hedged ~67% of its estimated net cash flows. It plans to increase this hedge ratio to at least 90% and is also looking at putting in place hedges for two years instead of one, given the expected continued volatility in the IDR.
Maintain HOLD
In terms of financial position, LMIRT’s gearing stood at 31.3% as at 31 Dec 2014. It has ~S$200m worth of debt maturing in Jul this year, and management is seeking to refinance this, likely with another bond issuance. LMIRT is hopeful of obtaining a lower interest rate for this refinancing exercise. Following a change in analyst coverage and taking into account a larger unit base, we pare our FY15 DPU projection by 4.7%. Our DDM-derived fair value estimate is lowered from S$0.37 to S$0.35. Although LMIRT offers a decent FY15F distribution yield of 8.5%, we are maintaining our HOLD rating as we see limited total returns ahead.
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