LMIR Trust posts 18% drop in 1Q DPU to 0.55 cents

Stanislaus Jude Chan

SINGAPORE (Apr 22): The manager of Lippo Malls Indonesia Retail Trust (LMIR Trust) has announced distribution per unit (DPU) of 0.55 cent for the 1Q19 ended March, some 17.9% lower than DPU of 0.67 cent a year ago.

Gross rental income fell 7.1% to $37.4 million in 1Q19, from $40.3 million a year ago.

The decline was due to lower rental income from Lippo Plaza Batu and Palembang Icon on the expiry of the master leases in July 2018, and the perennial weakening of the Indonesian Rupiah by 1.6% from 1Q18.

Total gross revenue was 34.2% higher at $65.9 million in 1Q19, compared to $49.1 million a year ago.

This was due to service charge and utilities recovery amounting to $23.2 million during the current quarter, compared to $0.7 million a year ago, following the taking over of the collection of service and utilities recovery charges directly from tenants.

Total property operating expenses jumped close to five-fold to $25.4 million in 1Q19, from $5.2 million a year ago.

This was due to higher property operating and maintenance expenses of the malls and retail spaces, which amounted to $19.9 million during the current quarter, compared to $0.8 million a year ago.

Consequently, net property income for 1Q19 was 7.8% lower at $40.5 million, compared to $43.9 million a year ago.

As at Mar 31, the trust’s portfolio occupancy remained at 91.5%, compared to the industry average of 80.7%.

Gearing stood at a stable 33.9%, compared to 34.6% as at Dec 31, 2018.

As at end March, cash and cash equivalents stood at $68.5 million.

“Following the gradual recovery of the Indonesian Rupiah against the Singapore Dollar since the beginning of this year, the trust is also showing improved quarter-on-quarter performance as we continue to actively manage and revamp our portfolio to keep up with changing consumer preferences and to generate higher organic growth,” says Gouw Vi Ven, chief executive officer of the REIT manager.

She notes that LMIR Trust has also commenced asset enhancement initiatives (AEIs) at Sun Plaza, which is expected to be completed by 2021. The refurbishment works include a total uplift of its façade and interiors, as well as reconfiguration of the mall’s layout to maximise useable space.

The trust is also looking to boost long term growth inorganically with the proposed acquisition of the iconic Lippo Mall Puri for Rp3,700 billion ($354.7 million).

“Puri Mall has high growth potential in the long run as it is part of the largest premium mixed-use development in West Jakarta,” says Gouw. “Moreover, with rental support from our sponsor, this property is NPI yield accretive and will generate long-term value for our unitholders.”

Units of LMIR Trust closed 1.0% lower at 19.8 cents on Monday, before the announcement of its 1Q19 results.