2 Things That Investors Should Know About Lippo Malls Indonesia Retail Trust Now
There are two things about the REIT that investors may want to know about right now: its latest financial performance and valuation.
Here is a table showing important items from Lippo Malls’ financial performance for the second quarter of financial year ending 31 December 2018 (FY2018).
Source: Lippo Malls’ earnings release
Overall, we see that most metrics came in weaker for the latest quarter, with the exception of total gross revenue.
The higher gross revenue was due to three new acquisitions in 2017. Yet, the weakening of the Indonesian rupiah, new tax regulations, and higher property operating expenses impacted the net property income for the quarter. As of 30 June 2018, Lippo Malls’ occupancy rates and gearing ratios stood at 93.6% and 36.0% respectively.
In sum, it was a challenging quarter for Lippo Malls due to weak currency exchange and high operating expenses.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows Lippo Malls’ PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: SGX StockFacts (data as of 21 September 2018)
From the above, we can see that Lippo Malls is trading at a discount to market average based on its low PB ratio and high distribution yield.