OCBC Investment Research 2015-06-08: BUY SMRT, HOLD Lippo Malls Indonesia Retail Trust

SMRT Corporation Ltd: Not subscribing for OMGTEL’s shares

SMRT Corporation Ltd (SMRT) announced last Friday its decision not to proceed to exercise the option granted to SMRT to subscribe for shares in OMGTEL Pte Ltd (OMG). SMRT stated that it has reviewed its capital allocation priorities and decided at this time not to take a passive interest in OMG, but will continue to place its investment focus on business areas such as rail engineering where SMRT has an active interest.

Recall that OMG’s intention is to bid for the licence to become Singapore’s fourth telco, and recently signed a collaboration agreement with SMRT on marketing and outreach support, while granting an option to SMRT to invest up to S$34.5m for the subscription of OMG’s shares.

As highlighted in our previous reports, we believe the option only allows SMRT to own an insignificant stake in OMG, and is unlikely to have any financial impact. Hence, we keep our forecast unchanged and in view of the medium to longer-term catalysts driven by regulatory changes in Singapore, maintain BUY with FV of S$1.85. (Eugene Chua)

Lippo Malls Indonesia Retail Trust: Leveraging on buoyant retail sales trend

Indonesia’s retail sales momentum remained solid, increasing 23.6% YoY in Apr, despite some uncertainties over its economic outlook. Lippo Malls Indonesia Retail Trust’s (LMIRT) recent 1Q15 results has reflected this positive retail sales trend, as its gross revenue and DPU grew 24.7% and 16.2% YoY to S$42.0m and 0.79 S cents, respectively.

LMIRT has ample opportunities for inorganic growth ahead, as its sponsor Lippo Karawaci currently has 15 malls in the pipeline. Looking ahead, LMIRT believes the prospects for quality retail spaces in Indonesia remains bright over the next 12 months.

Meanwhile, management has sought to reduce risks for unit holders, having hedged ~93% of its estimated net cash flows in IDR for the next two years. 100% of its borrowings are also on a fixed rate basis or hedged with interest rate swaps. We make no changes to our forecasts, HOLD rating and S$0.35 fair value estimate. (Wong Teck Ching Andy)

Source: http://www.ocbcresearch.com/

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