Lippo Malls Indonesia Retail Trust’s Latest Earnings: What Investors Should Know

Lippo Malls Indonesia Retail Trust  (SGX: D51U), or LMIR Trust for short, released its second-quarter earnings report for its fiscal year ending 31 December 2015 yesterday evening. The reporting period was from 1 April 2015 to 30 June 2015.

The real estate investment trust has a portfolio of retail or retail-related properties in Indonesia. It currently has 17 retail malls as well as seven retail spaces within other malls; all told LMIR Trust has a total net lettable area of more than 780,000 square meters.

You can catch the REIT’s previous earnings in here.

Financial highlights

The following’s a quick take on LMIR Trust’s latest financial figures:

  1. Gross rental income rose to S$34.1 million in the reporting quarter, up 18.8% from the same quarter a year ago. Gross revenue (which includes other income) came in at S$42.2 million, up 24.2% year-on-year.
  2. As a result, net property income (NPI) for the reporting quarter jumped by 25.3% from S$31.2 million a year ago to S$39 million.
  3. LMIR Trust’s quarterly distribution per unit (DPU) came in at 0.73 cents, a slower 7.4% increase from the 0.68 cents seen in the second-quarter last year.
  4. As of 31 December 2014, the REIT’s property portfolio was valued at $1.85 billion collectively. The REIT had a net asset value per unit of S$0.3927 at the end of the reporting quarter, down by 4.9% from the figure of S$0.4129 that was reported a year ago.

Beyond these, Foolish investors might want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for LMIR Trust below:

Lippo Malls Indonesia Retail Trust's balance sheet details (6 August 2015)

Source: LMIR Trust’s earnings presentation; author’s calculation

At the end of the second-quarter of 2015, LMIR Trust’s all-in cost of debt had a range of 4.3% to 6.5%. It should also be noted that the REIT’s balance sheet had weakened compared to the end of 2014. As the table above shows, LMIR Trust’s debt-maturity had fallen while both its gearing ratio and borrowings had climbed.

An unsecured bond worth S$75 million was issued during the reporting quarter to fund the acquisition of Lippo Plaza Batu and Palembang Icon. This pushed up the REIT’s gearing to 35.0% at the end of the quarter. (LMIR Trust’s gearing had fallen slightly to 34.3% as of 5 August 2015).

Operational highlights

The rise in LMIR Trust’s rental income came about due to the acquisition of Lippo Mall Kemang (LMK) at the end of 2014 and the positive rental reversions that were taking place within the REIT’s existing portfolio. Other income also benefited from the addition of LMK’s carpark income.

Those aren’t the only benefits that LMK has brought to LMIR Trust. With the acquisition of the mall, LMIR Trust’s assets under management (AUM) had been boosted by IDR3,641 billion to IDR17,258 billion at end-2014. .

As of 30 June 2015, the REIT had a weighted average lease expiry profile (by nett lettable area) of around 4.9 years and an occupancy rate of 94.4%. These compare to the selfsame figures of 4.06 years and 95.3%, respectively, seen a year ago.

Alvin Cheng, Chief Executive Officer of the REIT’s manager, had the following comments on LMIR Trust’s outlook ahead:

“The increase in DPU due to the acquisition of Lippo Mall Kemang attest to the REIT Manager’s conviction to deliver accretive acquisitions to our unitholders. However, the positive impact from the acquisition of Lippo Mall Kemang has been partly offset by the further depreciation of IDR.

With the newly acquired assets, Lippo Plaza Batu and Palembang Icon in July, coupled with the stable business fundamentals in Indonesia for retail malls, as well as the continuing high occupancy rate, we look forward to continually increase portfolio revenue and distributions to unitholders in the coming quarters.”

Foolish summary

LMIR Trust last traded at S$0.35 on Wednesday. This translates to a historical price-to-book ratio of around 0.9 and a distribution yield of around 8.3%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.