LIPPO MALLS INDO RETAIL TRUST
D5IU.SI
Lippo Malls Indonesia Retail Trust - Dual earnings growth drivers
- 1QFY16 results largely in line, supported by organic and acquisition expansion.
- Achieved 7.5% rental renewal growth over preceding levels.
- Sizeable FY17 lease expiries to underpin positive earnings trajectory.
- Proposed acquisition of Lippo Mall Kuta and Lippo Yogjakarta to further drive inorganic growth.
- Maintain Add with a DDM-based target price of S$0.37.
■ 1Q16 results in line
- LMIRT’s results were largely in line with 1QFY16 DPU of 0.83 Scts (+5.1% yoy) making up c.27% of our full-year forecast.
- At the topline, revenue in rupiah terms climbed 9.6% yoy while NPI rose a healthy 6.6%.
- An estimated 1.9% yoy depreciation in rupiah to Singapore dollar led to 8.5% revenue improvement and 4.6% higher NPI in Singapore dollar terms.
- Distribution income rose 7.8% yoy to S$23.2m thanks to organic and acquisition expansion.
■ Organic expansion drove earnings
- Income growth came largely from organic rental improvement as well as contributions from new acquisitions such as Lippo Plaza Batu and PICON, bought in July 15.
- In 1Q16, the trust renewed 20,920 sq m of NLA, largely from specialty stores, at 7.5% over preceding levels, while portfolio occupancy stayed high at 94.7%.
- Management guided that with rising purchasing power and disposable income of the middle class, retail sales is likely to remain resilient. This would likely benefit LMIRT’s portfolio of malls.
■ Sizeable lease renewals in FY17 should underpin growth
- The trust has a remaining 7% of leases expiring in FY16 and 24% in FY17. We believe that the bulk of the renewals for FY17 are for the longer dated retail space leases.
- Given the robust performance of retailers within this trade category, we expect the trust to continue to enjoy positive rental reversions when these renewals are concluded.
■ New acquisitions to further boost bottomline
- The trust had earlier announced the proposed acquisition of Lippo Mall Kuta and Lippo Yogjakarta, valued at a total of S$132.6m. Final details are still pending, but based on earlier indications, these purchases could add c.S$14.9m or 8-10% to LMRT’s portfolio NPI, when completed. This will continue to drive LMRT’s income growth.
- LMIRT’s gearing stands at 35.7% and has sufficient debt headroom to fund the purchase.
■ Maintain Add, near term earnings visibility sustained
- We tweak our FY16-18 DPU by 0.4-2.4% to adjust for the latest property details and proposed acquisitions.
- LMIRT has hedged c.90% of their distribution income till Feb 2017. As such, LMIRT offer investors high FY16 dividend yield of 9.4% with good earnings visibility.
- We maintain our Add call with an unchanged DDM-based target price of S$0.37.
LOCK Mun Yee
CIMB Securities
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YEO Zhi Bin
CIMB Securities
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http://research.itradecimb.com/
2016-05-04
CIMB Securities
SGX Stock
Analyst Report
0.37
Same
0.37
