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Highlights from Lippo Malls Indonesia Retail Trust’s First Quarter Results

lippo malls trustLippo Malls Indonesia Retail Trust (SGX: D5IU), the only real estate investment trust (REIT) listed here that owns 16 retail malls and seven retail spaces in Indonesia, released its first quarter results on Monday.

Quarterly total gross revenue declined 14.5% year-on-year to S$33.7 million mainly due to loss of rental guarantee income from Pluit Village and depreciation of Indonesian Rupiah (IDR) against the Singapore Dollar (SGD) when translating revenues denominated in IDR to SGD, despite the increase in rental income in IDR. In IDR terms, rental income rose 6.2% year-on-year.

Similarly, net property income decreased 16.6% to S$31.1 million due largely to the depreciation of IDR. In IDR terms, net property income would have only decreased by 1%. As a result of the lower net property income, and after deducting finance and other costs, the first quarter distributable income decreased by 14.7% to S$16.7 million, translating into a distribution per unit (DPU) of 0.68 Singapore cent. In the previous quarter, DPU was at 0.89 Singapore cent.

It was not all doom-and-gloom at the REIT. For the quarter, occupancy of the portfolio stood at 95.6% as compared to an industry average of 83.1%. Also, rental reversion on average was at 9.4%.

Gearing ratio as of 31st March 2014 was 26.7%, an improvement from 34.2% seen at the end of last year. The weighted average maturity of loans was at 2.3 years and the average all-in cost of borrowing has been reduced from 5.63% to 5.29%.  Net asset value per unit rose almost 10% from S$0.41, at the end of last year, to S$0.45.

Mr. Alvin Cheng, Chief Executive Officer of the manager of the REIT, commented, “The underlying business fundamentals remained solid, as illustrated by the growth in Gross Rental Income and increasing occupancy of the malls. The portfolio performance was affected by few challenges in the past years, namely, the 15.8% depreciation of IDR y-o-y, as well as the expiry of Rental Support in Pluit Village. However, there are clear signs of improvement in Pluit Village’s occupancy and rental income, and the Indonesian currency has appreciated considerably since the beginning of 2014.”

The trust’s sponsor, PT. Lippo Karawaci Tbk, which is also the sponsor of First REIT (SGX: AW9U), is one of the largest listed property developers and mall operators in Indonesia. Going forward, the trust said that it will continue to explore its sponsor’s pipeline of quality assets in Indonesia. Higher disposable income, the growing consumer class together with an emerging trend of lifestyle shopping malls in the country will also help fuel the demand for retail space.

Units at Lippo Malls Indonesia Retail Trust closed at S$0.41 on Monday, translating to a price-to-book ratio of 0.9 and a distribution yield of 7.4%.