Lippo Malls Indonesia Retail Trust - CIMB Research 2015-12-09: Positive rental boost

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LIPPO MALLS INDO RETAIL TRUST D5IU.SI 

Lippo Malls Indonesia Retail Trust - Positive rental boost 

• Acquisitions of three new malls helped boost earnings. 
• Robust rental reversion of 22.9% while occupancy stands at a high 93.9%. 
• Long WALE underpins income stability 
• Healthy gearing of 35%, FY16 refinancing should extend debt maturity profile. 
• We maintain our Add recommendation with a target price of S$0.40. 

■ New acquisitions an added boost to bottom line 

• LMRT posted a 32.7% gain for 3Q15 gross revenue to S$44.1m, despite a 5.1% depreciation of the Indonesian rupiah, thanks to the acquisition of Lippo Mall Kemang, Lippo Plaza Batu and Palembang ICON as well as positive rental reversions within existing malls. 
• After taking into account higher interest expense and a slightly higher effective tax rate of 30%, distribution income expanded 25.9% to S$21.5m (DPU: 0.77 Scts). 

■ Robust organic rental improvement 

• LMRT enjoyed a 22.9% positive rental reversion for the 36,026sm renewed in 3Q15, while portfolio occupancy remained high at 93.9%. 
• With a remaining 4% and 8% of leases to be renewed in FY15 and FY16, respectively, we anticipate the trust to continue to enjoy positive rental uplift when re-contracting these leases. 

■ Resilient tenant base underpins long WALE 

• LMRT’s portfolio is relatively stable with top 10 tenants making up c23% of gross rental income and includes tenants in the non-discretionary trade sectors such as Matahari Department Store, Hypermart, Carrefour, Gramedia, Solaria and Giant Supermarket. These underpin the trust’s weighted average lease expiry (WALE) of 5.13 years. 

■ Healthy balance sheet 

• LMRT’s gearing stood at 35% as at Sep 15 while its debt maturity profile is 1.84 years. An estimated 50% of its outstanding loans, totaling S$350m, is due to be renewed in FY16, and we expect the trust to maintain its current interest cost due to the still low interest rate environment. 

■ Maintain Add 

• At 10.1% FY15 DPU yield and at 0.84x P/BV, we see LMRT as inexpensive vs other overseas-centric S-REITs. 
• LMRT offers investors a pure-play exposure to the long-term rising Indonesian consumer story that is underpinned by the rapidly expanding consumer class and increasing disposable income. 
• We retain our Add call with an unchanged DDM-based target price of S$0.40.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-12-09

CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 0.40 Same 0.40