Lippo Malls Indonesia Retail Trust - CIMB Research 2016-02-24: Boosted by acquisitions

LIPPO MALLS INDO RETAIL TRUST D5IU.SI

Lippo Malls Indonesia Retail Trust - Boosted by acquisitions

Results in line; the 24% rise in FY15 distribution income from organic rental growth and new acquisitions.
Renewed 8% of leases at 9.5-22% higher rents, while the addition of 3 new properties boosted the income base
With another 8%/23% of leases to be renewed in FY16/17, we expect continued positive rental performance.

Proposed purchase of another 2 malls since start of 2016 should build income base.
Maintain Add, with a lower DDM-based target price of S$0.37.

LMRT reported a 24% yoy rise in 4Q15 revenue to S$44.6m, and a 29% yoy increase in distribution income to S$22.7m (DPU: 0.81 Scts).
For FY15, it reported a 26% jump in revenue to S$173m while distribution income came in at S$85.6m, +26% yoy. This was due to positive rental reversions from its portfolio, as well as contributions from new acquisitions. This was also achieved despite a weaker rate of Rp9,697 against the S$ (vs. Rp9,337 in FY14). The trust also took a S$53.3m revaluation deficit.

For FY15, LMRT signed or renewed leases for a total of 108,811sm of NLA and achieved positive rental reversions of +9.5-22%, while portfolio occupancy remained high at 94%.
There was also new income from Lippo Mall Kemang (acquired at end- 2014) as well as Lippo Plaza Batu (LPB) and Palembang ICON (PICON) which was purchased in Jul 15. We estimate these properties were bought at a blended NPI yield of 8.3%.

For FY16, LMRT is expected to continue to enjoy a full year’s contributions from LPB and PICON. An estimated 8% and 23% of leases are due to be renewed in FY16 and FY17, respectively.
With retail sales still growing in the low double-digit in Indonesia, we anticipate the trust to continue enjoying positive rental uplift when re-contracting leases.

The trust had recently announced the purchase a 2 more malls – Lippo Mall Kuta (LMK) for S$81.6m as well as jointly acquired an integrated retail mall/hospital in Yogyakarta for a total S$91.8m.
LMRT’s share amounts to S$51m and will give the trust separate economic rights to all the assets and revenue of the retail mall.
Assuming totally debt funded, we estimate that LMRT’s gearing could go up from the present 35% to 39%.

We lower our FY16 and FY17 DPU estimates by 4.6% and 4.4%, respectively, as we assume a lower exchange rate of Rp9,800 vs. the S$. We also introduce our FY18 estimates.
Additionally, we adjust our DDM-backed target price to S$0.37 from S$0.40, as we adopt a higher cost of equity of 11.4%.
With an 18% upside to our target price and FY16 DPU yield of 9.8%, we maintain our Add call.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-02-24

CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 0.37 Down 0.40