Lippo Malls REIT (LMIR)

[KopiKat]

Hey guys,

Was looking closely at lippomall again when yield reach 7.5%. It seems like a reasonable yield and taking into consideration the following.

Pluit village mall settled the messy ligitation with carrefour, I am not sure how the out of court settlement terms are, but the trust is insured against such losses if I read correctly. Carrefour has a floor area of about 13000m2 before the issue starts, and carrefour keep to the same area, the occupancy rate at pluit village will improve to above 90% and contribute 3.8 million NPI in a year, which works out to be 0.001772195 cents. Not significant but the amount is like a buffer to protect against rise in fiance cost as a result of interest hike, which everyone is talking about.

Up till 2014, the only floating rate that LMIR is exposed to is for amount of 75 million at a rate of 4.3% They still have 425 million fund not drawn from their MTN. Assume they use it to retire the 147.5million bank loan, and the interest that have to pay become 6.3% (the highest trance of MTN notes is 5.875% due 2017) , the correspond increase in finance cost is only 3 million.

Their gearing is 24%, assume there is no acquisition and loan amount remain the same, but valuation of assets fall due to increase of interest rate, i run the scenario of a 10%, 20%, 30% and 40% drop in valuation, and the gearing become 27%, 30%, 34% and 40% respectively. in other words, valuation has to fall by more than 30% to hit gearing limit. If they get their company rated, the ceiling cap will become 60% then.

seem like the 7.5% yield is "quite safe" till 2015 at least.

Any thoughts??

All their assets are in Indonesia, FOREX risk is likely one of the key cause of the current weakness (aside from potential interest rate hike). From an Indonesia news article,

Rupiah May Continue to Weaken

JAKARTA – The weakening of rupiah exchange rate in offshore markets that have exceeded the psychological level of Rp 10,000 per United States (US) dollar is estimated to continue several months ahead. Currency market observers assess that the markets are weighing in on global economic uncertainty and inflation from the plan to increase fuel oil price, and this affects rupiah’s movements.

Rupiah exchange rate in the non-deliverable forward (NDF) market in Singapore touched Rp 10,339 per US dollar and Rp 10,087 per US dollar in the spot markets. Based on Bank Indonesia’s middle rate, rupiah slipped 0.16 percent to Rp 9,806 per US dollar.

Also stumbled on an older but interesting Yahoo article on NDF while searching...

Insight: How Singapore's currency club fell apart

[Greenrookie]

IMO, a great results, with DPU increasing from 0.89cents in the last quarter to 0.93 cents.

http://infopub.sgx.com/FileOpen/Press_Re...eID=250407

The usual party spoiler still exists thou, dilution due to rights issue, although gearing is low at 24%, the cap is 35% since it is not rated.

The currency hedging has a good record thus far.

[BlueKelah]

Debt amount still the same this quarter, didn't pay back a single cent of loans despite good income? Doesn't feel like good management..

[Nick]

Debt amount still the same this quarter, didn't pay back a single cent of loans despite good income? Doesn't feel like good management..

REITs don't repay debt with operating cash earnings. They are forbidden to do so with the > 90% cash payout rule.

[KopiKat]

IMO, a great results, with DPU increasing from 0.89cents in the last quarter to 0.93 cents.

http://infopub.sgx.com/FileOpen/Press_Re...eID=250407

The usual party spoiler still exists thou, dilution due to rights issue, although gearing is low at 24%, the cap is 35% since it is not rated.

The currency hedging has a good record thus far.

Yes, better than I expected. But, for now, the mkt see REITs as not as attractive (higher interest rate) & Indonesia Growth story is stuttering... Will keep for longer term for now as Yield is still ok for me.

[BestPrice]

From 58 cents high down to 39.5 cents today, -31.9%

[starcraft_76]

The sell down seems overly done if the fall in ind Rupiah is the reason.

Base on SGD1 vs IDR7800 as base rate, the INR had dropped about 9%. Yet the share price is dropping much more aggressively.

[Nick]

S$ 147.5 million loan facility to mature in June 2014.
S$ 200 million 4.88% fixed rate note (EMTN Program) to mature in July 2015
S$ 50 million 5.875% fixed rate note (EMTN Program) to mature in July 2017
S$ 75 million 4.48% fixed rate note (EMTN Program) to mature in Nov 2017

http://infopub.sgx.com/FileOpen/2013_2Q_...eID=250487 [Slide 14]

Unless I am mistaken, doesn't this means the debt (especially the fixed rate notes) are priced in SGD ? This would imply debt and interest expenses are in SGD while its operating revenue and property valuation are in IDR. If IDR continues to depreciate against the SGD, a larger portion of the revenue will be diverted to pay the interest and the lower property valuation will result in higher gearing. Granted, the Management would have probably hedged forex movements in the short term but nonetheless I guess this is why the market is selling it down ?

(Not Vested)

[Nick]

S$ 147.5 million loan facility to mature in June 2014.
S$ 200 million 4.88% fixed rate note (EMTN Program) to mature in July 2015
S$ 50 million 5.875% fixed rate note (EMTN Program) to mature in July 2017
S$ 75 million 4.48% fixed rate note (EMTN Program) to mature in Nov 2017

http://infopub.sgx.com/FileOpen/2013_2Q_...eID=250487 [Slide 14]

Unless I am mistaken, doesn't this means the debt (especially the fixed rate notes) are priced in SGD ? This would imply debt and interest expenses are in SGD while its operating revenue and property valuation are in IDR. If IDR continues to depreciate against the SGD, a larger portion of the revenue will be diverted to pay the interest and the lower property valuation will result in higher gearing. Granted, the Management would have probably hedged forex movements in the short term but nonetheless I guess this is why the market is selling it down ?

(Not Vested)

Is the market trying to price in a currency crisis? A 15% drop in rupiah against SGD willl only cause a 5% dent in income distributable to unitholders, correction excessive IMO. Assume a 10% fall in DPU to account for interest rate(2percent increase lead to only about 3million increase in Finance cost) and currency weakness, unitholders should be look at 3.2 cents dividends, and at 40 cents per unit, its still a attractive 8% yield

(vested and accumulating)

Just curious - why is this so ? Is this due to the hedging ?

[Greenrookie]

S$ 147.5 million loan facility to mature in June 2014.
S$ 200 million 4.88% fixed rate note (EMTN Program) to mature in July 2015
S$ 50 million 5.875% fixed rate note (EMTN Program) to mature in July 2017
S$ 75 million 4.48% fixed rate note (EMTN Program) to mature in Nov 2017

http://infopub.sgx.com/FileOpen/2013_2Q_...eID=250487 [Slide 14]

Unless I am mistaken, doesn't this means the debt (especially the fixed rate notes) are priced in SGD ? This would imply debt and interest expenses are in SGD while its operating revenue and property valuation are in IDR. If IDR continues to depreciate against the SGD, a larger portion of the revenue will be diverted to pay the interest and the lower property valuation will result in higher gearing. Granted, the Management would have probably hedged forex movements in the short term but nonetheless I guess this is why the market is selling it down ?

(Not Vested)

Is the market trying to price in a currency crisis? A 15% drop in rupiah against SGD willl only cause a 5% dent in income distributable to unitholders, correction excessive IMO. Assume a 10% fall in DPU to account for interest rate(2percent increase lead to only about 3million increase in Finance cost) and currency weakness, unitholders should be look at 3.2 cents dividends, and at 40 cents per unit, its still a attractive 8% yield

(vested and accumulating)

Just curious - why is this so ? Is this due to the hedging ?

My apologies, I am looking only on the effect of currency on finance costs and hence on DPU, and the effect seem straight forward. Thanks nick for asking and making me think deeper.

My mistake, I have not account for the weakness in revenue after conversion. Sorry for my scattered head analysis... Will delete my earlier post.