CIMB Securities 2015-08-06: Lippo Malls Indonesia Retail Trust - 2Q15 Results. Further room to grow. Maintain ADD.


Further room to grow 

  • LMIRT’s 2Q15 results were in line with our expectation, with 2Q and 1H’s DPU accounting for 23% and 49% of our full-year estimate, respectively. 
  • Though we expect the recent acquisitions of LPB and PICON to boost DPU by 2.4%, the ongoing rupiah weakness and higher interest expenses have prompted us to trim FY15’s DPU estimate by 2.6%. 
  • Given LMIRT’s room for further growth, both organically and inorganically, we keep our Add rating and DDM-based target price of S$0.40

Results within expectations 

  • Lippo Malls Indonesia Retail Trust’s (LMIRT) 2Q15 revenue and DPU came in higher at S$42.3m (+24.2% yoy) and 0.73 Scts (+7.4% yoy), respectively. 
  • The stronger topline was mainly attributed to a firmer portfolio performance and additional contribution from Lippo Mall Kemang (LMK), which was acquired in Dec 14. 
  • Its portfolio occupancy remained stable at 94.4%. More acquisitions In 2Q14, management achieved a positive rental reversion of 11.4% for the new/renewed leases. 
  • Looking ahead, with Indonesia’s economy expected to remain positive (+4.7% yoy in 2015), LMIRT is well positioned to enjoy the upward swing in retail sales growth. 
  • In Jun 15, management announced the proposed acquisition of Lippo Plaza Batu (LPB) and Palembang Icon (PICON) for a total consideration of S$106.8m (IDR1,055bn). 
  • Given its estimated NPI yield of c.8.0% as well as c.76.6% of the acquisitions to be financed via debt, we estimate that these acquisitions will boost DPU by c.2.4%. 
  • However, with the ongoing weakness in rupiah (-5% yoy) and higher interest expenses, we trim our DPU forecast by 2.6% for FY15. 
  • With the recent completion of the above-mentioned acquisitions, its leverage ratio is expected to rise to 34%. 

Maintain Add 

  • At this juncture, we consider LMIRT to be inexpensive as it is currently trading at 8.9% FY15 dividend yield and 0.89x P/BV vs. 7.7% FY15 dividend yields and 0.94x P/BV for other SGX-listed REITs with large overseas exposure. 
  • Our Add rating is intact, as we expect the full-year contribution from LMK and additional contributions from the recently acquired malls to boost earnings further.

PANG Ti Wee | LOCK Mun Yee | TAN Xuan CFA | http://research.itradecimb.com/ CIMB Securities 2015-08-06
ADD Maintain ADD 0.40 Same 0.40