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Latest Earnings From Lippo Malls Indonesia Retail Trust

Yesterday evening, Lippo Malls Indonesia Retail Trust (SGX: D51U) released its earnings for the quarter and year ended 31 December 2015.

For a brief background, Lippo Malls Indonesia Retail Trust, or LMIR for short, is a real estate investment trust with a portfolio of retail and retail-related properties in Indonesia. The REIT’s portfolio currently comprises of 19 retail malls and seven retail spaces within other malls. These are all located in Indonesia, have a total net lettable area of 816,798 square metres, and are collectively valued at S$1.8 billion as of 31 December 2015.

With that, let’s dig into LMIR’s latest results.

Financial highlights

The following’s a quick take on some of the important financial figures:

  1. Gross revenue had advanced by 23.9% to S$44.6 million in the reporting quarter as compared to a year ago. For the year, gross revenue was up by 26.3% to S$173 million.
  2. Net property income (NPI) for the quarter had grown in-line with the higher gross revenue, climbing by 22.3% to S$40.2 million. NPI for the full year displayed similar growth, up by 25.8% to S$158.5 million.
  3. The higher top-line had benefitted the REIT. LMIR’s distributable amount for the reporting quarter had grown by 29% to S$22.7 million; for the full-year, the distributable amount was S$85.6 million, 25.8% higher than in 2014.
  4. This translated into 14.1% year-on-year growth in the available distribution per unit to 0.81 Singapore cents.  For the whole of 2015, the available distribution per unit was up by 12.3% to 3.10 Singapore cents.
  5. But on the flip side, LMIR ended the year with a net asset value per unit of S$0.38, down 9.5% from the previous year.

All told, LMIR had performed well, achieving double-digit growth in revenue, net property income, and distribution per unit.

Other important areas of the REIT’s finances would be the balance sheet. LMIR had ended 2015 with a gearing ratio of 35%, up from the 31% seen a year ago. This had primarily been the result of a higher debt load (increase from S$630 million to S$695 million). In other words, the REIT’s balance sheet had grown a little weaker

At end-2015, LMIR had a weighted average maturity of 2.0 years for its borrowings. This is down from the 2.12 years seen in 2014. The REIT’s cost of borrowings also appear to have risen a little from that seen at end-2014. To the point, LMIR’s interest rates for its fixed-rate borrowings had ranged from 4.25% to 5.875% at that time. As of end-2015, its fixed-rate debt have rates ranging from 4.1% to 5.95%.

Of the S$695 million in total borrowings that LIMR has as of 31 December 2015, S$275 million will be coming due in 2016 and 2017. (The S$275 million includes a S$100 million loan due January 2016 that has already been refinanced.)

Operational highlights and a future outlook

In the fourth-quarter of 2015, LMIR had reported a positive rental reversion of 13.2% and a weighted average lease expiry (by lettable area) of 4.91 years. These are improvements from a year ago when the self-same figures were 10.8% and 3.4 years, respectively.

In LMIR’s earnings presentation for the fourth-quarter of 2015, the REIT also commented on two tailwinds that it could possibly enjoy: 1) Indonesia’s retail market is fragmented, but there’s a visible pipeline of malls from the REIT’s sponsor and other third-parties that could be injected into the REIT’s portfolio; and 2) Indonesia has an economy driven by domestic demand and it has “remained resilient in the face of global uncertainty.”

Alvin Cheng, the chief executive of LMIR’s manager, had the following comments in the earnings release on the REIT’s near-term future:

“With the announcement of the two potential acquisitions, we will be presenting the proposals to unitholders for approval at an EGM as soon as possible. Meanwhile, 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”.

LMIR last traded at S$0.32 on Tuesday. This translates to a historical price-to-book ratio of 0.84 and a distribution yield of around 9.69%.

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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 James Yeo doesn’t own shares in any companies mentioned.