(Stocks Discussion) SGX: Lippo Malls Indonesia RETAIL (SGX: D5IU)?

Oh dear so sad, this REIT is not doing well. Do not be enticed by the high dividend yields. That is a trap. Low can go lower still.

As of Dec 2018, LMIRT has the highest yield (11.289%) across 43 REITs and Proprty Trusts listed on SGX. Despite the downgrade of rating from B2 to B3, LMIRT has been able to manage its debt strategically based on historical data and is highly likely that debt obligations will be repaid fully. This is supported by a good gearing ratio of 33.7%, relatively low compared to MAS regulatory cap for REITs of 45%.

LMIRT's interest coverage (calculated by dividing financial expense by net property income) is within the safe zone of 6 times (5 times is benchmark for safe). However, an increasing concern for LMIRT is its high cost of debt vis-à-vis other retail S-REITs. The REIT has an average cost of debt at 4.7% while other major players such as CapitaLand Mall Trust and Fortune REIT has an average of 3.2% and 2.41% respectively. This high borrowing cost is compensated by its high property yield.

A downside risk for LMIRT is forex weakness which could potentially have an adverse impact when the REIT is converting Indonesian rupiah earnings to Singapore dollars. The depreciation of the Indonesian rupiah caused the REIT's book value to drop to $0.27/unit.