Stock.i1: Lippo Mall Indonesia Retail Trust

Lippo Mall Indonesia Retail Trust has released its 3Q FY2021 result on 26 October 2021. In this article, we will be looking at the highlights of their results and the management outlook for the REIT.

About Lippo Mall Indonesia Retail Trust

Lippo Mall Indonesia Retail Trust (“LMIR Trust”) is a Singapore-based real estate investment trust established with the principal investment objective of owning and investing, on a long-term basis, in a diversified portfolio of income-producing real estate in Indonesia that are primarily used for retail and/or retail-related purposes.

LMIR Trust’s portfolio comprises 22 retail malls and seven retail spaces located within other retail malls. The Properties have a total net lettable area of 958,064 square metres and total carrying value of Rp18,992.8 billion as at 30 September 2021.

3Q FY2021 Result Highlights

For 3Q FY2021, LMIR Trust’s gross revenue grew by 7.0% year-on-year to S$30.89 million. The higher topline was mainly due to the contribution from its latest acquisition of Puri Mall. However, it was partially offset by various factors such as:

• Loss of income during the temporary closures of retail malls and retail spaces and the imposition of activity restrictions in July 2021.
• Extended free rental and 40% service charge discount to tenants during the temporary closure period.

At the same time, net property income increased by more than 30% year-on-year to S$17.29 million, on back of a higher gross revenue and a lower Property Operating and Maintenance Expenses.

As a result, distribution to unitholders surged to S$6.90 million and this translates into a distribution per unit of 0.09 Singapore cents.

1Gross Revenue includes Rental Revenue, Carpark Revenue, Service Charge and Utilities Recovery and Other Rental Income

Capital Management & Debt Maturity Profile

As at 30 September 2021, LMIR Trust has a total debt load of S$859.4 million and this translates into a gearing ratio of 42.3%, which is lower than the regulatory limit of 50.0%. Meanwhile, its interest coverage ratio stood at just 1.7 times, which is on a slightly weaker side.

With the latest fund-raising exercise, this resulted in a surge in the total units issued to more than 7.6 billion units. This resulted in the massive dilution in terms of its net asset value to just 9.78 Singapore cents per unit. Based on the share price of S$0.056, it is trading at around 0.57 times its NAV.

In terms of its debt expiry profile and the given cash balance on hand, LMIR Trust does not face much re-financing hurdle until 2024, where a S$82.5 million term loan and S$337.4 million worth of bonds will be due for re-financing.

Occupancy Rate & Lease Expiry Profile

In terms of its operating metrics, LMIR Trust’s overall occupancy rate stood at 81.1% in 3Q FY2021. This is 2.3 percentage points lower as compared to the earlier quarter (2Q FY2021). This was mainly attributed to the early termination of leases of anchor tenants – Matahari Department Store and Hypermart.

Investors should also take note of the declining occupancy rate since FY2017 and see if a rebound will occur in future.

Looking at LMIR Trust’s lease expiry profile, there is currently left with just 3.8% of the total leases by Net Leasable Area ("NLA") that will be due for renewal.

Meanwhile, LMIR Trust has adopted the strategy of a balanced mix of long-term anchor leases and shorter-term leases for non-anchor tenants that will provide both stability and growth potential.

Management Outlook

In terms of management outlook, Mr. James Liew, Chief Executive Officer of the Manager, highlighted, “The highly infectious Delta variant that caused a resurgence of the outbreak in Indonesia continues to impact the Trust’s financial performance as we need to continue to provide rental support to our tenants over the next few months.

We will also be working closely with our mall operator to actively bring in new and replacement tenants to boost the occupancy of some of the malls that were significantly impacted during this past one and half years of challenging operating conditions.”

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