Lippo Malls Indonesia Retail Trust - OCBC Investment 2016-05-04: 1Q16 results within our expectations

Lippo Malls Indonesia Retail Trust - OCBC Investment 2016-05-04: 1Q16 results within our expectations LIPPO MALLS INDO RETAIL TRUST D5IU.SI 

Lippo Malls Indonesia Retail Trust: 1Q16 results within our expectations 

  • DPU growth of 5.1% 
  • Rental reversion of 7.5% 
  • Unchanged fair value 

Results in-line with expectations 

  • Lippo Malls Indonesia Retail Trust (LMIRT) reported its 1Q16 results which came in within our expectations. 
  • Gross revenue jumped 8.5% to S$45.5m, coming up to 26% of our full-year forecast. 
  • By comparison, 1Q15 gross revenue contributed 25% for FY15. The increase was driven largely by positive rental reversions at existing malls and the acquisitions of LPB and PICON in July 2015, but was offset be the depreciation of the IDR against the SGD. 
  • In IDR terms, gross revenue jumped 9.6% to IDR 436.1bn. 
  • DPU increased 5.1% YoY to 0.83 S cents, making up 27% of our FY16 forecast. 

Strong economic fundamentals support retail growth 

  • Despite the uncertain global economic outlook, strong economic fundamentals within the country have helped to support the LMIRT’s operational performance this past quarter. 
  • According to the Indonesia Investment Coordinating Board 1Q16 press release, Indonesia’s FDI increased by 17.1% YoY to IDR 96.1tn in 1Q16. 
  • Furthermore, official government estimates point to an economic growth of between 5.1% to 5.2% in 1Q16. 
  • The Indonesian Retail Sales Index stands at 189.0, indicating a 9.9% YoY growth for the month of Feb 2016. 
  • LMIRT’s overall occupancy was 94.7% as at 31 Mar 2016. 
  • LMIRT’s average rental reversion was positive at 7.5% in 1Q16, a 5.7 ppt QoQ increase as compared to 13.2% in 4Q15. 
  • In the near term, retail space supply is expected to be limited in Jakarta, thus providing a favorable market condition for existing shopping mall owners. 

Maintain HOLD; S$0.35 fair value 

  • Our FY16 dividend yield is 9.3% based on our DPU forecast of 3.06 S cents. 
  • LMIRT’s current dividend yield based on 1Q16’s DPU, annualized, is 10.1%. 
  • We note that 24% of LMIRT’s leases (by NLA) expire in 2017, and rental reversions going forward will depend heavily on economic conditions as revealed by indicators of retail strength. LMIRT’s current Weighted Average Lease Expiry is 4.92 years by NLA. 
  • LMIRT’s balance sheet is healthy with a gearing ratio stands at 35.7%. 
  • As for foreign exchange risk, the trust has forex options to mitigate its exposure on currency movement. 
  • We maintain HOLD with an unchanged fair value estimate of S$0.35.

Deborah Ong OCBC Securities | http://www.ocbcresearch.com/ 2016-05-04
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.35 Same 0.35