Lippo Malls Indonesia Retail Trust (SGX: D5IU)'s 3Q DPU Was Down By 87.5%
Lippo Malls Indonesia Retail Trust (SGX: D5IU) has recently announced its third-half 2020 financial results. It is trading at 4.76% dividend yield based on its last traded of $0.084 on 13 Nov.
Key Highlights:
Distribution per unit (DPU) and Dividend Yield (4.76%)
Price to book ratio (0.48)
Gearing (42.5%)
Portfolio Occupancy (85.5%0
Interest coverage ratio (2.6x)
Growth catalyst
Background of Lippo Malls Indonesia Retail Trust
Lippo Malls Indonesia Retail Trust owns and manages 30 retail malls in Indonesia. According to the REIT, those malls are “strategically located in major cities of Indonesia with large middle-income population”.
Lippo Malls Indonesia Retail Trust’s sponsor is Lippo Karawaci Tbk, one of the largest listed property developers in Indonesia, who is also a co-sponsor of the healthcare REIT, First Real Estate Investment Trust (SGX: AW9U).
1. Distribution per unit and dividend yield
Its net property income in 2H2020 tumbled 70.2% to $13.1m. This was mainly due to the temporary closure of its retail malls amid the Covid-19 outbreak, as well as the divestments of Pejaten Village and Binjai Supermall in the last quarter. After taking into consideration account fixed and financing costs, the REIT recorded nil distributable income during this quarter.
Based on its latest price, the REIT is currently trading at about 4.76% dividend yield. Historically, the REIT's DPU has been declining in the past 8 years. The average yield was 8.6%.
2. Price to book ratio
Over the past 5 years, Lippo Malls Indonesia Retail Trust has been trading at an average price to book ratio of 0.82. The recent price correction has brought down the ratio to 0.47, indicating a 40% discount based on its historical valuation.
3. Gearing
Lippo Malls Indonesia Retail Trust is one of S-REITs with the highest portfolio leverage at 42.5%, with a weighted debt maturity of 2.6 years. While MAS has recently lifted the gearing ceiling to 50%, we still think that the current gearing level of the REIT is unhealthy.
4. Portfolio Occupancy
The portfolio occupancy is severely impacted by the Covid-19. Some of the properties and shops are still temporarily closed due to the pandemic. Despite the impact of the Covid-19, the portfolio occupancy of the REIT has been declining in the past 5 years.
5. Interest coverage ratio
Aims Apac REIT has a low interest coverage ratio of 2.6 times, which is way below our preference of 4 times. The REIT maintains a high interest cost of 5.85%.
6. Growth Catalyst
The pandemic has restricted the malls to operate at a shorter operating hours, 50% capacity caps with ad-hoc restrictions at least until 2Q21. Besides, the REIT has also granted additional rental relief to affected tenants until end 2020, while negotiations with other key tenants are still ongoing.
Summary
The fundamentals of the REIT does not look healthy based on its latest results. Its Q3 DPU has down by 87.5%, and share price has dropped 81% over the past three years.
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