Lippo Malls Indo Retail Trust (LMIR) - OCBC Maintains Buy Call

OCBC maintained its BUY position on Lippo Malls Indo Retail Trust (LMIR) with a $0.45 fair value on it.  They believe that LMIR trust is in a comfortable position for further growth as the gearing remains low.  Aggregate leverage is still expected to be around 10% post acquisition giving it quite a bit of headroom for taking on further debt to fuel future acquisitions if necessary.  LMIR trust has also refinanced its bank borrowings that were due 26 Mar.  There are no immediate refinancing requirements over the next year.

Other comments about it as follows:


Demand for retail malls/spaces remains strong...

OCBC remain positive on Lippo Malls Indonesia Retail Trust’s (LMIRT) financial performance in 2012. Retail sales in Indonesia have been treading along a positive trend line since 1Q11, based on survey by Bank Indonesia. In Jakarta and Medan where the most of LMIRT’s retail malls/spaces are located, we note that Oct retail sales accelerated by 41.1% and 22.3% YoY respectively, following Sep sales growth of 26.1% and 16.3%. While the Consumer Confidence Index in Nov eased slightly by 1.6% MoM to 114.3, respondents were still optimistic that retail sales in 1Q12 are likely to remain high. As such, we believe the demand for its retail malls/spaces is likely to remain healthy.

Recent acquisitions to drive growth...

LMIRT had also recently announced the completion of acquisitions of Pluit Village and Plaza Medan Fair. It expect these new additions, which collectively make up around 26.3% of its portfolio NLA, to contribute significantly to its rental revenue in 2012. According to management, the investments are likely to boost its distributable income by 61% from S$47.9m seen in FY10, while its adjusted DPU yield would increase to 8.43% from 8.38%. The acquisitions are expected to be DPU yield accretive and were done at a discount of 4.1-5.7% to their average valuations.