LMIR – OCBC

POISED FOR FURTHER GROWTH

•Consistent set of results

•Demand for retail space to stay strong

•Well-positioned for growth

4Q11 results within expectations

Lippo Malls Indonesia Retail Trust (LMIRT) reported NPI of S$24.6m (+16.8% YoY) and distributable income of S$11.4m (-5.1% YoY) for 4Q11. This is in line with our quarterly forecasts of S$23.7m and S$12.7m respectively. DPU for the quarter (post rights issue) came in at 0.53 S cent, lower than 4Q10 DPU of 1.11 S cents but still consistent with our projection of 0.58 S cent. For FY11, NPI grew by 7.9% to S$92.0m and distributable income fell 0.9% to S$47.4m. DPU, on the other hand, was down 13.0% to 3.85 S cents. However, this translates to a still attractive FY11 yield of 9.9%.

Optimistic outlook from management

Moving forward, LMIRT reiterated that its retail malls are likely to continue to benefit from Indonesia’s robust economic growth and strong domestic consumption. Management also highlighted that there is a demand-supply imbalance for quality retail space, which is likely to keep the demand for its malls strong. We note that its portfolio occupancy rate as at 31 Dec 2011 remained healthy at 94.1% (97.8% in prior quarter), well above Indonesia’s retail industry average of 87.6%. The Dec 2011 Retail Sales Survey by Bank Indonesia also showed that retail sales is expected to remain strong throughout 1H12. Hence, we concur with LMIRT that its financial performance in the coming quarters is likely to remain favorable, especially with full-quarter contributions from recently-acquired Pluit Village and Plaza Medan Fair going forward.

Financial position remains strong

As at 31 Dec 2011, LMIRT’s aggregate leverage was at low 8.7% (10.1% in 3Q), boosted by a positive 5.7% YoY revaluation of assets (excluding acquisition assets) and rights issue. In addition, approximately S$931m (60.4%) of its assets are unencumbered. This gives LMIRT the financial flexibility and capacity to realize its growth plans. Maintain BUY with unchanged fair value of S$0.45 on LMIRT.