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

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. 

■ Boosted by acquisitions and organic rental growth 

  • 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. 

■ Achieving double-digit rental uplift, added 3 properties 

  • 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%. 

■ Benefiting from organic expansion…. 

  • 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. 

■ …. and new acquisitions 

  • 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%. 

■ Maintain Add 

  • 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