Dividend dry spell continues for Lippo Malls Indonesia Retail Trust in 3QFY2023

For 3QFY2023, LMIRT announced rental revenue of $28.1 million, down 6.2% compared to last year.

Lippo Malls Indonesia Retail Trust (LMIRT) D5IU will not be paying any distributions per unit (DPU) for its 3QFY2023 ended Sept 30.

As announced on Sept 18, this will be the third consecutive quarter in which LMIRT will not be paying distributions to holders of its $140 million perpetual securities. The REIT manager first announced the dividend stopper provisions on March 20.

Under the provisions, unitholders will not receive any dividends, distributions or any other payment on the units or on the $120.0 million perpetual securities unless and until certain conditions are made.

For 3QFY2023, LMIRT announced rental revenue of $28.1 million, down 6.2% compared to the same period last year.

Gross revenue for the period slipped 3.8% to $49.8 million, largely due to the 5.8% y-o-y depreciation of the Indonesian Rupiah against the Singdollar, as well as lower rental contributions of $0.7 million from Lippo Plaza Jogja due to the expiry of master leases in December 2022.

In rupiah terms, rental revenue for the quarter edged down 1.2% to IDR316.0 billion, while gross revenue rose 1.3% to IDR560.2 billion on higher service charge and utilities recovery in 3QFY2023 as more tenants returned to full operations.

LMIRT’s property operating expenses stayed relatively stable, increasing slightly to $19.1 million compared to $18.9 million in 3QFY2022.

Net property income (NPI) fell by 6.6% y-o-y to $30.6 million, and slipped also by 1.7% y-o-y in rupiah terms to IDR344.8 billion.

As at Sept 30, LMIRT’s net asset value (NAV) stood at 7.78 cents per unit, up over 6.85 cents per unit at the same time in 2022. Its gearing stood at 43.0%, with an interest cover of 1.97x excluding perpetuals as at the same period. Its fixed rate debt ratio stood at 39.4%.

LMIRT’s occupancy rate fell by 4.6 percentage points q-o-q to 76.8% as at the end of 3QFY2023, mainly due to the early termination and downsizing of Carrefour anchor leases in Palembang Square, Tamini Square and Lippo Plaza Kramat Jati, where initiatives have been taken to convert these vacated spaces to cater for mini-anchor or speciality tenants.

Its weighted average lease to expiry (WALE) stood at 2.3 years by net lettable area (NLA), down from 2.9 years as at June 30. Average rental reversion stood at 1.4% as at end-3QFY2023, up from 1.2% in the quarter before.

Cash and cash equivalents stood at $98.6 million as at end-September.

LMIRT notes that despite some easing in inflation, the Indonesian Rupiah continued to weaken to its lowest level against the US Dollar since 2020, at 15,871. This triggered the raising of its key rate by 25 basis points to 6.00% by Bank Indonesia to strengthen stabilisation measures for the currency against the impact of increasing global uncertainty.

The key rate is now at its highest level since June 2019, with further weakness in the IDR possibly triggering more rate hikes. Nevertheless, Indonesia’s economic growth forecast remains at 4.5% to 5.3% for 2023.

“As we continue to exercise prudence in our capital management, conserving cash to stabilise our performance in this challenging high interest rate and depreciating IDR environment, exacerbated by geopolitical tensions and subdued global and domestic economy,” says CEO of the manager James Liew says, noting that Trust successfully secured support from its existing relationship lenders to extend our maturing loans.

“Despite the successful extension of the loans in 2023, given the challengers outlined above, distributions to both the Perpetual Securities Holders and Unitholders will unfortunately remain constrained until a comprehensive solution is determined for the Trust’s maturing debts in 2024.”

Units in LMIRT closed 0.1 cents or 4.76% up at 2.2 cents on Nov 9.

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