Lippo Malls Indonesia Retail Trust - CGS-CIMB Research 2020-02-21: Stable Q-o-q

LIPPO MALLS INDO RETAIL TRUST (SGX:D5IU)

Lippo Malls Indonesia Retail Trust - Stable Q-o-q

Lippo Malls Indonesia Retail Trust (SGX:D5IU)'s 4Q/FY19 DPU of 0.52/2.23 Scts was in line with our projections.
4Q19 portfolio average positive rental reversion was 4.4%.
Reiterate HOLD with a lower DDM-based Target Price of S$0.24.

Lippo Malls Indonesia Retail Trust (SGX:D5IU) reported a 9.2% y-o-y rise in 4Q19 gross revenue to S$69.6m, thanks to positive rental reversion and a stronger rupiah vs. S$. 4Q19 distribution income of S$15.1m and DPU of 0.52 Scts were 74% and 66.7% higher y-o-y, respectively, due largely to lower property operating expenses through more cost-efficient management, and lower allowance for doubtful debts as well as higher non-cash adjustments items.
Lippo Malls Indonesia Retail Trust's FY19 DPU of 2.23 Scts is broadly in line with our expectations at 101.4% of our forecast.

Portfolio occupancy slipped 1.4% pts y-o-y to 91.5% at end-4Q19. In FY19, Lippo Malls Indonesia Retail Trust benefited from an average 4.4% positive rental reversion while NPI margin averaged 64.5%.
Lippo Malls Indonesia Retail Trust has 21.63% of leases to be re-contracted in FY20F, and 7.7% in FY21F. In FY19, revenue from related party tenants accounted for 24.1% of gross revenue; non-related party tenants comprising international and local brands made up 63.5%. This helped to diversify the trust’s rental income source.
In Dec 2019, Lippo Malls Indonesia Retail Trust had announced the divestment of Binjai Supermall and Pajetan Village for a total of S$130.9m. The divestment proceeds will help to enhance the group’s financial flexibility, in our view.

The trust posted a 3.4% depreciation in portfolio value in rupiah terms in FY19. As a result, its book value slipped to S$0.28/unit and gearing rose to 35.9% as at end-4Q19.
Lippo Malls Indonesia Retail Trust has 10% and 24% of its total debt maturing in FY20F and FY21F, respectively. As at end-4Q19, average interest cost stood at 6.14%.

We tweak our FY20F DPU estimates marginally post its results announcement. However, our DDM-based Target Price is reduced to S$0.24 on assumption of a lower terminal growth rate of 1.5% (vs. 2% previously).
We maintain our HOLD recommendation in the absence of near-term re-rating catalysts.
See Lippo Malls Indonesia Retail Trust Share Price; Lippo Malls Indonesia Retail Trust Target Price; Lippo Malls Indonesia Retail Trust Analyst Reports; Lippo Malls Indonesia Retail Trust Dividend History; Lippo Malls Indonesia Retail Trust Announcements; Lippo Malls Indonesia Retail Trust Latest News.
Downside risks to our call include forex weakness that we think will have an adverse impact when Lippo Malls Indonesia Retail Trust converts its rupiah earnings to S$.
Upside risks could come from accretive new acquisitions.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-21

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.24 DOWN 0.27