Lippo Malls Indo Retail Trust’s (LMIRT) 4Q17 results were within expectations. 4Q17 gross rental income increased 8.3% YoY in IDR terms but only 1.5% YoY in SGD terms, due to the weakened rupiah. Recall that LMIRT has foreign currency options contracts to mitigate its exposure to on currency movement.

4Q17 DPU fell 9.8% YoY to 0.79 S cents, mainly due to one-off ~S$0.5m increase in administrative expenses due to the change in trustee as well as narrower gains from currency hedges due to the weakened rupiah. Altogether, FY17 revenue increased 5.0% to S$197.4 or 100.4% of our forecast, while FY17 DPU ended flat at 3.44 S cents or 99.4% of our forecast.

Going forward, issues that we will be paying attention to include the remaining currency hedges as well as plans for a potential equity fundraising. Against its FY17 DPU (actual), LMIRT is currently trading at 8.6% yield.

Pending further details from the briefing later this morning, we maintain BUY but place our fair value of S$0.460 under review.

Source: OCBC Research - 14 Feb 2018