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3 Things Lippo Malls Indonesia Retail Trust’s Management Wants You To Know About Its Business

In early May, Lippo Malls Indonesia Retail Trust (SGX: D5IU) released its 2018 first quarter earnings update. As a quick introduction, Lippo Malls Indonesia Retail Trust is a REIT that invests in retail properties in Indonesia. Its portfolio currently consists of 23 retail malls and seven retail spaces.

As I was going through all the materials that the REIT released as part of its earnings update, I saw three pieces of information that I think investors should pay attention to.

The first piece is a high-level summary of Lippo Malls Indonesia Retail Trust’s income statement for the first quarter of 2018:


Source: Lippo Malls Indonesia Retail Trust 2018 first quarter earnings press release

We can see that the REIT did not enjoy a good quarter. Although gross revenue was up, net property income, distributable income to unitholders, and DPU (distribution per unit) were all down. This was mainly driven by a decline in the rupiah against the Singapore dollar (a 9.1% year-on-year fall), as well as higher property expenses and an increase in income taxes as a result of a new regulation that was passed recently. The new regulation levied a 10% tax on outsourced service charges and utilities recovery charges.

The next piece of information I want to discuss involves the REIT’s portfolio occupancy rate and lease expiry profile:


Source: Lippo Malls Indonesia Retail Trust 2018 first quarter earnings presentation

There are two things worth mentioning. Firstly, Lippo Malls Indonesia Retail Trust’s portfolio occupancy has hovered around the 94% mark in the last few years, and more importantly, has been higher than the industry-average. Secondly, the REIT has a fairly well-distributed lease-expiry profile, which provides the REIT with good rental income visibility over the next few years.

The last piece of information I want to talk about concerns the REIT’s outlook.

Here are a few relevant data points from Lippo Malls Indonesia Trust’s latest earnings update:

1. The World Bank projects Indonesia’s GDP (gross domestic product) to grow at 5.3% in 2018.
2. Indonesia’s inflation rate edged up slightly to 3.4% in March from 3.2% in February.
3. Retail sales in Indonesia inched up by 1.5% year-on-year in February. It is projected that retail sales in March in the country would increase by 1.7% on an annual basis.

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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.