Lippo Malls Indonesia Retail Trust - OCBC Investment 2016-06-07: March Retail Figures Suggest Robust Demand Outlook

Lippo Malls Indonesia Retail Trust - OCBC Investment 2016-06-07: March Retail Figures Suggest Robust Demand Outlook LIPPO MALLS INDO RETAIL TRUST D5IU.SI 


  • Healthy forecasts for Apr
  • Matahari expansion plans
  • E-commerce yet to be a big threat

Retail sales up 11.6% YoY in March

  • Bank Indonesia recently lowered its 2016 economic growth outlook from 5.2%-5.6% to 5.0%-5.4%. 
  • Nonetheless, the Indonesian Retail Sales Index (RSI) indicated 11.6% YoY growth in March, on the back of a 33.9% jump in Information & Communication Equipment sales and an 11.1% growth in F&B and Tobacco sales. 
  • In comparison, the retail survey reported a 10.6% YoY growth in February. Respondents expect a slower growth of 11.3% YoY in April, with more muted growth for nearly all of the goods categories.

Sales turnover expected to grow 10% to 12% this year

  • The Indonesian Retailers Association (Aprindo) expects retailer sales to increase between 10% and 12% this year over last year’s IDR 150tn. 
  • Several retailers have announced expansion plans. Lippo-owned hypermarket operator, Matahari Putra Prima, LMIRT’s largest tenant with a 9.4% contribution to gross rental income, has set aside IDR 700bn in capex for an expansion in eastern Indonesia; it plans to open 20 new branches this coming year. Salim-owned Indomarco also plans to spend IDR 1.3tn to 1,300 new outlets. Clothing retailer Ramayana plans to spend IDR 350bn to add 6 branches. 
  • With the expansion plans of local retail players as well the recent liberalization of foreign ownership in the retail segment, we expect demand for LMIRT’s retail malls to remain robust in at least the next 2 to 3 years.

Threat from online players still small

  • Current estimates for the size of e-commerce players within the retail market tend to be small. 
  • According to Statista, e-commerce sales accounted for only 1.4% of all retail sales in Indonesia in 2015. We nonetheless expect this to be a potential industry changer in the next few years with companies like Lippo Group announcing major e- commerce plans. 
  • In terms of LMIRT’s tenant trade mix, Food & Beverage and Fashion contribute the largest proportions of rental income at 17.8% and 16.2% as of 1Q16. We deem F&B to be defensible item category against online competition, while fashion-related goods may be relatively susceptible. 
  • Against yesterday’s closing price of S$0.33, LMIRT is currently trading at 9.1% FY16 yield. Upgrade to BUY with an unchanged S$0.35 fair value estimate.

Deborah Ong OCBC Securities | http://www.ocbcresearch.com/ 2016-06-07
OCBC Securities SGX Stock Analyst Report BUY Upgrade HOLD 0.35 Same 0.35