Latest Earnings From Lippo Malls Indonesia Retail Trust: DPU up 5.1%

Yesterday evening, Lippo Malls Indonesia Retail Trust (SGX: D5IU) released its earnings for the first ended 31 March 2016.

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 765,273 square metres, and are collectively valued at S$1.8 billion as of 31 December 2015.

You can catch the REIT’s previous earnings here. With that, let’s dig into LMIR’s latest results.

Financial highlights

The following’s a quick take on some of the latest financial figures (in SGD terms):

  1. Total revenue edged up 8.5% to S$45.5 million in the reporting quarter as compared to a year ago.
  2. On the other hand, due to higher operating expenses, Net property income (NPI) for the quarter had only increased 4.6% to S$40.8 million.
  3. The higher top-line had benefitted the REIT. LMIR’s distributable amount for the reporting quarter had grown by 7.8% to S$23.18 million
  4. This translated into 5.1% year-on-year growth in the available distribution per unit to 0.83 Singapore cents.
  5. LMIR ended the quarter with its net asset value per unit unchanged at S$0.38.

In summation, LMIR had performed reasonably well, achieving satisfactory growth in all areas – revenue, net property income, and distribution per unit. This can be attributed to the positive rental reversion of 7.5% coupled with new and renewed leases of approximately 20,920 square meters during 1Q 2016.

Other important areas of the REIT’s finances would be the balance sheet. LMIR ended the quarter with a gearing ratio of 35.7%, up from the 31.6% seen a year ago. In contrast, the REIT had managed to keep its cost of borrowings in check. To the point, LMIR’s interest rates for its fixed-rate borrowings had ranged from 4.5% to 6.5% at that time. As of March-2016, its fixed-rate debt have rates ranging from 4.26% to 6.73%.

Of the S$695 million in total borrowings that LIMR has as of 31 December 2015, S$275 million will be due in 2016 and 2017. (The S$275 million includes a S$100 million loan due January 2016 that has already been refinanced.) As always, the progress in refinancing of debt is where investors should keep a watchful eye on.

Valuation and Prospects

In LMIR’s earnings presentation for the first-quarter of 2016, the REIT also gave some insights on its future growth plans:

  • The REIT can choose to build its portfolio through two ways: (i) opportunistic third-party acquisitions or (ii) search within its Sponsor’s pipeline of quality assets in Indonesia
  • Indonesia has solid economic fundamentals driven by domestic demand and it is “expected to grow by approximately 5.1% in 2016”
  • Demand for retail space likely to step up due to “higher disposable income, lower inflation, coupled with an emerging trend of lifestyle shopping malls”

Ms. Viven Sitiabudi, Executive Director of the REIT Manager, is positive that the REIT will continue to grow at a healthy clip by saying,

“We have achieved quarterly increases in DPU since 2Q 2015. With the country’s large population base and rapidly expanding middle consumer class with increasing levels of purchasing power and disposable income, we look forward to growing our revenues and distributions to unitholders in the coming quarters”.

LMIR last traded at S$0.33 on Tuesday. This translates to a historical price-to-book ratio of 0.86 and an annualized distribution yield of around 10%.

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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.