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Author: kimeng   |   Latest post: Mon, 24 Sep 2018, 10:09 AM

 

Lippo Malls Indo Retail Trust (LMIRT): New Tax Regulations to Hit DPU; Rating Under Review

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Lippo Malls Indonesia Retail Trust (LMIRT) announced yesterday that Indonesia has passed new tax regulations on income received/earned from land and building leases in the country. In particular, such income will be subject to a 10% tax on the value of the amount collected by tenants, including service charges and utility coverage charges. The new regulation is effective 2 Jan 2018.

For the purposes of illustration, assuming the new regulations were in effect as of 1 Jan 2017 instead, the REIT manager calculates that FY17 DPU would have been 7.2% lower at 3.19 S cents (pro forma) instead of 3.44 S cents (actual). A DPU of 3.19 S cents works out to a historical dividend yield of 8.4% against yesterday’s closing price of S$0.38. We believe the news will prompt selling pressure on the counter.

As we use a dividend discount model to value the REIT, a hit to future projected dividends will have a negative impact on our fair value of S$0.405. We place our Hold rating and fair value on LMIRT under review.

Source: OCBC Research - 12 Apr 2018

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