Lippomalls

Hi guys,

Was looking up on reits that are badly beaten. Lippomall caught my attention.

I initial position yesterday for a 7.5% yield, I felt that the recent scare about interest rate hike is somewhat overdone, and start looking for values.

positives:
1)7.5% yield
2)only 75 million of bank loan is floated at 4.3%, which is due 2014.
3) If interest increase by 2% by next year (very agressive allowance for interest hike), fiance cost only increase by 3 million
4) 3 million increase can be offset by carrefour new tenacy at pluit village mall, and occupancy will be pump up to 90%
5) Latest aquisitions finally making a increase in DPU, according to the latest quarter report, it is also due to rental revision.
6) Gearing is 24%, to hit 35% cap if they dun gear up to buy anything, valuation of assests has a allowance to drop by 30%, I doubt the interest increase will trigger such a drop on valuation, since some of the malls under lippo are freehold, under BOT scheme, and unemcumbered.


Risks:
While fiancing risk is accounted for till 2015 at least, there is also currency risk, indonesia nation reserves is falling due to central bank intervention of currency. If Indonesia dollars plunge, its bye bye.
There is also operation risks at the malls, but retail is still rather defensive, The total weighted average occupancy lease term for the portfolio as of 31 December 2012 was 5.3 years,The total weighted average occupancy lease term for the portfolio as of 31 December 2012 was 5.3 years, with only 25% expiring by 2014.
Political and economic risk of doing business in indonesia, especially political.

I might have enter too early, since market is still in correction mode, but 7.5 is good enough for me, forummers may look for lippo at 42 cents -8.5% yield,if it gets there

I think it's a cool investment 7.5% yield. Capital gain would be more interesting if the yield gets compressed to say 5 or 6%.

Alternatives include:
Suntec Reit -- now about 6% yield ($1.62).

King Wan Corp -- now about 9.7% yield (31 cents).

The currency risk of rupiah has abated. With the hike of interest rate and most recent, the lowering of fuel subsidy
m.thejakartapost.com/news/2013/06/17/hou...-price-increase.html

Lippo mall did not participate in any rally yesterday. Lets hope it now move I tandem with other reits.

Thanks greenrookie, Lippomalls is also in my radar.

I would like to add more for LMIR Trust:
1. Good management & strong parentage in Lippo Group.
2. Indonesia Economy Outlook below.

INDONESIA ECONOMY OUTLOOK
Indonesia domestic demand continues to drive GDP growth with 4Q 2012 GDP growing at a stronger than expected 6.5% on a year on year basis. 2013 GDP growth is expected to remain above 6%, again supported by robust domestic demand and strong investment levels.

Consumption is being driven by a burgeoning and fast growing middle class. This in turn is supporting expectations of ongoing double-digit retail sales growth for 2013 and gives us comfort that our tenants and portfolio are well supported in the current environment.

The high degree of internally generated GDP growth, now estimated at in excess of 60%, allows the Indonesian economy to remain largely isolated from external shocks and sees Indonesia remaining Southeast Asia’s strongest economy.


KING WAN
King Wan last year dividend is 1.5 cts. At 31 cts dividend yield is about 5%.
Reck how you calculate the yield for King Wan as 9.7%?

Management indicated King Wan outlook next 12 months is challenging. Such as increasing competition, labour & materials cost. Margin lean & shortage in skill and unskill workers.


Market at this stage is very uncertain, I will invest in LMIR Trust at nearer to 8% yield.

Lippo mall reits (update 2)

Those interested in investing in lippo mall reits should has funds ready to subcribe to their rights over the next few years.

Lippo mall reits has a interesting business,their sponsor Lippo is fast expanding into the mall business and have 31 malls and another 12 (iirc)in the pipeline. Hence they have a asset light stragegy to gain recurring income from managing property.

Lippo mall has 1.75 billion assets and aim to be have a 4 billion assets over the next few years, while the strong pipeline of malls from sponsor, that is defintely attainable, the question is how to finance these aquisitions.

Lippo mall reits is not rated, and have a gearing of 24% over a cap of 35%, there is not much ammo for aquisition based on debt solely, so it should be a hybrid of debts and rights to fund future aquisitions.

The good news is, they have room to grow oragnically, not all malls are at above 90% occupancy and hopefully there will be positive rental revision if their malls can command a prenium(PArent Lippo is in a market leader position)

The key risk is, Lippo mall sometime price the rights at a hefty discount, but with the new CEO alvin cheng who has a rather good record at PST (although he is not shy from fund raising), we hope the new management is more sentitive to shareholders.

My gut feelings:
LMIR will not go for rating soon, as their parent company has a poor rating of BB- for their bonds. They might be waiting for a LMIR to be on bigger scale in terms of assets, EBITA, etc to go for a rating.

Lippo Malls & First REIT both gearing are about the same 24.5% as compare to the rest of REITs, both still have more room to grow oragnically. First REIT yield at this stage is still below 6% (I've sold all at about 5%). I'll start to load up Lippo Malls when the yield is above 7.5%.