SINGAPORE (May 4): The manager of Lippo Malls Indonesia Retail Trust (LMIR Trust) reported a 24.7% fall in DPU to 0.67 cent for 1Q18 ended March, compared to 0.89 cent a year ago.
The decline came on the back of lower distributable income of $19 million from $25.1 million a year ago.
LMIRT Management says the trust’s performance in Singapore dollar terms was impacted by a 9.1% y-o-y weakening of Indonesia rupiah against Singapore dollar in 1Q18, as well as higher property expenses and an increase in income tax as a result of the new tax regulation passed by the Indonesian government.
This new regulation, which came into effect in January, levied a 10% tax on outsourced service charges and utilities recovery charges.
Total gross revenue for 1Q18 grew 10.3% to Rp504.0 billion. However, in Singapore dollar terms, revenue rose 1.1% to $49.1 million.
The positive results were mainly boosted by contributions from the acquisitions of Lippo Plaza Kendari in June 2017, Lippo Plaza Jogja and Kediri Town Square in December 2017, and partially offset by lower net property income of Rp15.9 billion in 1Q18 from Rp30.6 billion in 1Q17 as a result of the non-renewal of the master leases of the seven retail spaces.
Net property income (NPI) in rupiah terms rose 4.1% to Rp450.9 billion however NPI in Singapore dollar terms registered a 4.6% dip to $43.9 million, mainly due to higher property operating expenses, which more than doubled to $5.2 million from $2.5 million a year ago when expenses included a one-off reversal of allowance on doubtful receivables.
Chan Lie Leng, CEO of the REIT manager, “With the Monetary Authority of Singapore’s recent policy stance on the slight increase of the slope of the S$NEER band from zero percent previously, we expect further depreciation of the Indonesian Rupiah in the coming quarters."
LMIRT’s portfolio continued to register high occupancy of 94.0% compared to the industry average of 84.8%. In 1Q18, 7,912 square metres of space were renewed at a positive rental reversion of 5.3%.
The trust is also not over-reliant on one single tenant and we actively work with our mall operator to improve tenant mix and organise events and promotional activities to increase shopper traffic.
As at March 31, LMIR Trust’s gearing ratio stood at 35.0%, with weighted average all-in cost -- including cost for perpetual securities -- per annum at 5.28%.
Outlook growth prospects for the Indonesian economy remain strong, with the World Bank projecting GDP growth of 5.3% in 2018, driven by more robust investment and exports, while private consumption is expected to receive a boost from continued moderate inflation and lower consumer lending rates.
Units in LMIRT closed 1 cent lower at higher 33 cents on Thursday.
