Lippo Malls Indonesia Retail Trust - CIMB Research 2017-08-08: Boosted By Acquisitions

Lippo Malls Indonesia Retail Trust - CIMB Research 2017-08-08: Boosted By Acquisitions LIPPO MALLS INDO RETAIL TRUST D5IU.SI

Lippo Malls Indonesia Retail Trust - Boosted By Acquisitions

  • LMIRT's results in line, 2Q/1H DPU makes up 25%/50% of our FY17F forecast.
  • Enjoyed a 13% rental uplift on renewal in 2Q.
  • Acquisition of LPK to boost earnings from 2H, in our view.
  • Active capital management, gearing at a healthy 30.6%.
  • Maintain Add but tweak our DDM-based TP higher to S$0.43.



2Q results highlights 

  • LMRT reported a 2Q DPU of 0.9 Scts, +5.9% yoy. The improvement is underpinned by a 6.6% increase in revenue, thanks to positive rental reversion and new acquisitions.
  • Results are in line, with 2QFY17 and 1HFY17 DPU making up 25% and 50% respectively of our full-year estimate.


Positive rental reversion on renewal 

  • The trust enjoyed a 13% rental uplift for the 7,948 sqm (1% of total portfolio) NLA that was renewed in 2Q. This had extended its portfolio WALE to 4.32 years, with a balanced mix of long-term anchor leases and shorter-term non-anchor tenants to drive growth going forward. 
  • The trust has a remaining 18% of NLA to be renewed in 2H17 and 13% of NLA to be renewed in FY18. 
  • Committed portfolio occupancy remains at a high 94.3%.


Acquired Lippo Plaza Kendari 

  • 2Q earnings also benefited from additional contributions from the purchase of Lippo Mall Kuta in Dec 16. 
  • LMRT had recently acquired the Lippo Plaza Kendari (LPK) for Rp310bn (S$33.2m) in Jun 17 and expanded its portfolio NLA by 2.5%. LPK has a good tenant mix including Matahari Department Store, Hypermart, Solaria and Cinemaxx. On an annualised basis, we estimate that LPK could boost gross revenue by 1.5-2%.


Capital management 

  • LMRT’s gearing stood at a healthy 30.6% as at end-2Q17. Post the issuance of S$120m of 5-year 6.6% perpetual securities in Jun 17 and the partial pre-payment of S$55m of secured loans, gearing is anticipated to be reduced further to 28.1%. This puts the trust in a strong position to tap inorganic growth opportunities.


Maintain Hold 

  • We lower our FY17-19F DPU estimates by 3-3.4% post results as we moderate the forward rental reversions outlook. However, we tweak our DDM-based TP higher to S$0.43 as we update our risk-free rate assumptions. 
  • Following the recent share price run-up, LMRT has been trading at 7.8% FY17 DPU yield or at its average long-term yield.
  • The stock offers a total return of c.2%. Maintain Hold.


Valuations 

  • LMRT’s share price has done well in recent months. As such, its forward dividend yield had mean-reverted, trading at close to its historical average yield of 7.9%. 
  • In addition, its P/BV multiple of 1.23x is the highest in the post-GFC period. Hence, we find valuations not very compelling at this point. Maintain Hold.
  • Upside risk could come from new and accretive acquisitions, while downside risk could emerge if the rupiah depreciates against the S$ or if there is a slowdown in consumption or retail sales in Indonesia. 






LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-08-08
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 0.43 Up 0.410



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