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3 Reasons Why Lippo Malls Indonesia Retail Trust Can Continue To Grow Its Business

Lippo Malls Indonesia Retail Trust (SGX: D5IU) is the first and only real estate investment trust in Singapore’s stock market that has a focus on retail properties in Indonesia.

It currently has a diversified portfolio of 21 retail malls and seven retail spaces that are located across Indonesia. Since its listing, the REIT has grown its portfolio from 15 properties to 28 today.

Can it continue to grow in the future? I think it can. Here are three reasons I have to support my assertion.

1. Favourable population demographics

The chart below shows Indonesia’s demographics in 2016 and how it will change by 2018 and 2020:


Source: Lippo Malls Indonesia Retail Trust 2017 second quarter earnings presentation

We can see that the biggest population-group in Indonesia in 2016 was the 15-64 years-group. The number of people in the group is projected to grow from 175.1 million in 2016 to 184.5 million by 2020.

Given that the group of people aged 15 to 64 has the largest spending power, total retail spending in Indonesia should grow as the group’s number increases.

2. Higher household spending

Here is a chart showing projected changes to Indonesia’s household spending from 2014 to 2020:


Source: Lippo Malls Indonesia Retail Trust 2017 second quarter earnings presentation

In Indonesia, total household spending and per capita household spending are both expected to grow materially from 2014 till 2020. Higher household spending should benefit the retail industry as a whole.

Given Lippo Malls Indonesia Retail Trust’s exposure to Indonesia’s retail scene, the growth in household spending is a tailwind.

3. Presence of committed sponsor

The sponsor of Lippo Malls Indonesia Retail Trust, PT Lippo Karawaci Tbk, is Indonesia’s largest listed property company.

According to the REIT’s 2017 second quarter earnings presentation, Lippo Karawaci currently manages 46 retail malls and has plans to develop another 40 new malls, bringing total malls under management to over 80 by 2030.

Lippo Karawaci’s growth plans should benefit Lippo Malls Indonesia Retail Trust going forward since the latter has right-of-first-refusal to acquire the former’s properties.

Given Indonesia’s favorable demographics and growing household spending, and the presence of a committed sponsor, Lippo Malls Indonesia Retail Trust’s growth story should remain intact for the next few years, in my view.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.