Lippo Malls Indonesia Retail Trust - CGS-CIMB Research 2020-07-30: Still Feeling The Impact Of COVID-19

LIPPO MALLS INDO RETAIL TRUST (SGX:D5IU)

Lippo Malls Indonesia Retail Trust - Still Feeling The Impact Of COVID-19

Lippo Malls Indonesia Retail Trust's 2Q/1H20 DPU of 0.11/0.32 Scts were below expectations, at 6.6%/13.8% of our FY20F forecast.
Portfolio malls resumed operations; shorter trading hours to drag earnings.
Reiterate HOLD, with a lower DDM-based Target Price of S$0.176.

Lippo Malls Indonesia Retail Trust (SGX:D5IU) reported a 57.8% y-o-y decline in 2Q20 gross revenue to S$27.4m, due to lower rental income as no rental was billed during the temporary closure of retail malls and spaces since end-Mar 2020 amid the COVID-19 outbreak (except for tenants in essential services and those who elected to remain open).
Expiry of master leases at Lippo Mall Kemang in Dec 2019 and lower carpark and other income also dragged on earnings. However, DPU fell by a smaller 8.3% y-o-y to 0.11 Scts, as the S$14.4m income retained in 2H19 and 1Q20 was paid out in 2Q20.

Lippo Malls Indonesia Retail Trust indicated that all its 23 malls and 4 retail spaces have resumed operations by 3 July 2020, albeit with shorter trading hours. Portfolio occupancy slipped 2.7% pts q-o-q to 88.2% at end-2Q20.
Rental reversions averaged +3.9% in 1H20, largely due to positive reversions in 1Q. It has a remaining 13.7% of its lease portfolio expiring in FY20F.
Although shopper traffic as at mid-Jul 2020 has recovered to 43% of its Jan 2020 level, management expects rental income to continue to be adversely impacted in 2H20 due to the shorter operating hours of its tenants (8 hours vs. the usual 12 hours).

Lippo Malls Indonesia Retail Trust’s gearing stands at 35.7% as at end-2Q, with interest cover of 3.33x. Apart from a S$44m revolving credit facility, its next debt refinancing is for S$175m due in Aug 2021.
Lippo Malls Indonesia Retail Trust had paid the coupon on the 6.6% subordinated perpetual securities distribution payment in Jun and has provided for the upcoming coupon on the 7% subordinated perpetual securities distribution payment due in Sep 2020 on 23 Jul 2020.

Lippo Malls Indonesia Retail Trust announced the proposed divestment of Pejaten Village and Binjai Supermall for a total consideration of Rp1,280.7m in Dec 2019. Due to the adverse impact of the COVID-19 outbreak, the transaction price was revised to Rp1,152.6bn on 23 Jul 2020.
Completion of the sale of Pejaten Village is expected to be on 30 Jul 2020 and Binjai Supermall on 3 Aug 2020. Proceeds from the sale will enhance Lippo Malls Indonesia Retail Trust’s liquidity and financial flexibility to fund growth through reinvestments.

We cut our Lippo Malls Indonesia Retail Trust's FY20-22F DPU estimates by 0.6-38.7% to factor in lower income due to shorter trading hours and lower assumed payout ratio of 90%. Accordingly, our DDM-based Target Price is reduced to S$0.176.
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.
Upside risks: faster-than-expected normalisation of business activities, and hence, rental income.
Downside risks: continued decline in tenant sales, which could likely drag rental reversions and portfolio occupancy.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-30

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.176 DOWN 0.200