LMIRT’s 2Q15 results were in line with our expectation, with 2Q and 1H’s DPU accounting for 23% and 49% of our full-year estimate, respectively. Though we expect the recent acquisitions of LPB and PICON to boost DPU by 2.4%, the ongoing rupiah weakness and higher interest expenses have prompted us to trim FY15’s DPU estimate by 2.6%. Given LMIRT’s room for further growth, both organically and inorganically, we keep our Add rating and DDM-based target price of S$0.40.
Results within expectations
Lippo Malls Indonesia Retail Trust’s (LMIRT) 2Q15 revenue and DPU came in higher at S$42.3m (+24.2% yoy) and 0.73 Scts (+7.4% yoy), respectively. The stronger topline was mainly attributed to a firmer portfolio performance and additional contribution from Lippo Mall Kemang (LMK), which was acquired in Dec 14. Its portfolio occupancy remained stable at 94.4%.
In 2Q14, management achieved a positive rental reversion of 11.4% for the new/renewed leases. Looking ahead, with Indonesia’s economy expected to remain positive (+4.7% yoy in 2015), LMIRT is well positioned to enjoy the upward swing in retail sales growth. In Jun 15, management announced the proposed acquisition of Lippo Plaza Batu (LPB) and Palembang Icon (PICON) for a total consideration of S$106.8m (IDR1,055bn). Given its estimated NPI yield of c.8.0% as well as c.76.6% of the acquisitions to be financed via debt, we estimate that these acquisitions will boost DPU by c.2.4%. However, with the ongoing weakness in rupiah (-5% yoy) and higher interest expenses, we trim our DPU forecast by 2.6% for FY15. With the recent completion of the above-mentioned acquisitions, its leverage ratio is expected to rise to 34%.
At this juncture, we consider LMIRT to be inexpensive as it is currently trading at 8.9% FY15 dividend yield and 0.89x P/BV vs. 7.7% FY15 dividend yields and 0.94x P/BV for other SGX-listed REITs with large overseas exposure. Our Add rating is intact, as we expect the full-year contribution from LMK and additional contributions from the recently acquired malls to boost earnings further. (Read Report)
Source : CIMB Research