What Investors Need To Know About Lippo Malls Indonesia Retail Trust’s Third-Quarter Results

Lippo Malls Indonesia Retail Trust (SGX: D5IU), or LMIRT, released its third quarter results on Wednesday. The Trust has sixteen retail malls and seven retail spaces in its portfolio in Indonesia.

Gross rental for the quarter grew 1.6% year-on-year to Rp266.1 million due to an 11.6% rental reversions for its portfolio. However, when translated to Singapore Dollar terms, gross rental declined 9.6% to S$28.3 million, due largely to the depreciation of Indonesian Rupiah since the middle of 2013.

Net property income slumped 16.8% to S$30.9 million. Consequently, distributable income went down by 10.8% to S$17.1 million, after deducting finance and other costs.

Distribution per unit (DPU) for the latest quarter came in at 0.69 Singapore cents, down 20.7% from 0.87 Singapore cents exactly a year ago. Currency hedging and capital management strategies that were implemented in the fourth quarter of last year helped to cushion the impact on DPU.

As of 30 September 2014, the gearing ratio stood at 28.3%, unchanged from the end of June this year. All of the outstanding debts are now at fixed interest rates.

Mr. Alvin Cheng, Chief Executive Officer of the Manager of LMIRT, said, “The general outlook for Indonesia economy remained resilient following the election of the new President Mr. Joko Widodo. The underlying business fundamentals remained stable, as illustrated by the growth in Gross Rental Income and continuing high occupancy rate [which stood at 95%, compared to industry average of 86.1%]. The portfolio performance was affected by the 14.2% depreciation of IDR y-o-y and the expiry of the Rental Guarantee at Pluit Village.”

The trust is in the process of acquiring a newly developed mall, Lippo Mall Kemang, from its sponsor, PT. Lippo Karawaci Tbk, one of the largest listed property developers and mall operators in Indonesia, for S$385.7 million. Having a strong sponsor with assets that can be acquired on the pipeline bodes well for any trust. The sponsor has provided LMIRT with a “right of first refusal over its retail malls to be built across Indonesia”. Lippo Karawaci is also the sponsor of healthcare real estate investment trust, First Real Estate Investment Trust (SGX: AW9U).

Units at LMIRT closed at S$0.365 on Wednesday, translating to a distribution yield of 7.3% and a price-to-book ratio of 0.88, based on the latest book value per unit of S$0.4146.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.