LMIRT further growth opportunities

• Demand likely to stay sturdy
• Strong contribution from new additions
• No immediate refinancing needs

Fair value - S$0.45

Demand for retail malls/spaces to remain strong.
We remain positive on Lippo Malls Indonesia Retail Trust’s (LMIRT) financial performance in 2012. Retail sales in Indonesia have been treading along a positive trend line since 1Q11, based on survey by Bank Indonesia. In Jakarta and Medan where the most of LMIRT’s retail malls/spaces are located, we note that Oct retail sales accelerated by 41.1% and 22.3% YoY respectively, following Sep sales growth of
26.1% and 16.3%. While the Consumer Confidence Index in Nov eased slightly by 1.6% MoM to 114.3, respondents were still optimistic that retail sales in 1Q12 are likely to remain high. As such, we believe the demand for its retail malls/spaces is likely to remain healthy.

Recent acquisitions to drive growth.
LMIRT had also recently announced the completion of acquisitions of Pluit Village and Plaza Medan Fair. We expect these new additions, which collectively make up around 26.3% of its portfolio NLA, to contribute significantly to its rental revenue in 2012. According to management, the investments are likely to boost its distributable income by 61% from S$47.9m seen in FY10, while its adjusted DPU yield would increase to 8.43% from 8.38%. We view this positively as the acquisitions were expected to be DPU yield accretive and were done at a discount of 4.1-5.7% to their average valuations.

Maintain BUY.
LMIRT is also in a comfortable position for further growth opportunities. We estimate that its aggregate leverage will remain fairly unchanged at around 10% post acquisitions, giving it ample funding capacity for future investments. Moreover, LMIRT has successfully refinanced its bank borrowings due 26 Mar with a drawdown of S$147.5m under its new loan facility arrangement. With the debt due for repayment only in Jun 2014, LMIRT has no immediate refinancing requirements over the next year. We maintain our BUY rating and S$0.45 fair value on LMIRT.