2011-Feb-17 - OCBC - Lippo-Mapletree

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Please refer to the important disclosures at the back of this document.

FY10 results mostly in line; Maintain BUY

Lippo-Mapletree IndonesiaRetail

SINGAPORE Company Update Results MITA No. 010/06/2009

17 February 2011

Maintain

BUYPrevious Rating: BUY

Current Price: S$0.54Fair Value: S$0.59

SINGAPORE Company Update Results MITA No. 010/06/2010

Reuters Code LMRT.SI

ISIN Code D5IU

Bloomberg Code LMRT SP

Issued Capital (m) 1,082

Mkt Cap (S$m / US$m) 584 / 421

Major Shareholders

Lanius Ltd 18.3%

Mapletree LM Pte Ltd 13.1%

Algemene Pensioen 9.9%

CPI Capital Partners Asia 8.4%

ABN Amro Asset Mngmt 6.4%

Free Float (%) 43.9%

Daily Vol 3-mth (‘000) 895

52 Wk Range 0.420 - 0.580

4Q DPU of 1.11 S-cents. LMIR Trust (LMIR) reported 4Q10gross revenue of S$19.3m, up 41.6% YoY but down 4.7%QoQ. Distributable income however dropped 3.3% YoY butrose 2.5% QoQ to S$12.1m. For FY10, gross revenue jumped50.9% to S$129.4m, which was in line with our projection ofS$130m and market expectation of S$131m (based on

consensus estimate from Bloomberg). Distributable income,however, slipped 11.4% to S$47.8m, partly due to higheroperating expenses subsequent to the expiry of the OperatingCosts Agreements with third party operators (Opcos) on 31Dec 2009. Previously, Opcos were given rights to the servicecharges receipt and utilities cost recovery from tenants, whilstresponsible for the costs directly related to the maintenanceand operation of seven malls. The operating costs have sincebeen passed on directly to the REIT in FY10. 4Q DPU is 1.11S-cents (also in line with our forecast of 1.15 S-cents),representing an annualized yield of 8.16%, based onyesterday's closing price of S$0.54. This was 4.1% lower thanthe 1.16 S-cents paid out in 4Q09.

Portfolio Performance. Overall portfolio occupancy increases1.4 pp YoY to 98.3%; this compares well against Jakarta's

average occupancy rate of 86.3%. LMIR also benefited frompositive rental reversion with renewed leases contracted at10% higher on average than the ones that have expired duringthe year. LMIR continues to have a well-diversified portfolio,with no particular trade sector accounting for more than 17%of total net leasable area (NLA), and no single propertyaccounting for more than 18% of total net property income(NPI). We also noted that LMIR's gearing ratio of 10.3% isrelatively low, compared to other retail REITs. This places it ina favorable position to use debt financing to embark oninorganic growth in FY2011. On the organic-growth front, wealso understand that LMIR is exploring asset enhancementopportunities at some of its existing malls.

Positive Outlook. Management guided that the Indonesianeconomy is projected to remain buoyant1 , which will benefitthe retail industry. Retail leasing has started to pick up in3Q10, with a large number of leases recorded and severalnotable deals witnessed in newly completed projects. Foreignmajor retailers were also increasingly active in the market,with expansion plans in response to market opportunities.Furthermore, as new supply is expected to grow moderatelyin 2011, nationwide vacancy is anticipated to stabilize at around13.3% by end of 2011. Such a trend helps the market tomaintain stable occupancy and record good rental reversionsgoing forward. Our investment thesis for LMIR remains intact,supported by Indonesia's growth story and LMIR's qualityassets. Maintain BUY with an unchanged fair value of S$0.592.

1 The World Bank has forecasted Indonesia's GDP to grow at 6.2% and 6.3%

in 2011 and 2012 respectivel y. IMF has also project ed Indonesia's GDP growth

at 6.2% and 6.5% in 2011 and 2012 respectively.2 Key risks to our rating include reversal of recovery trends for the Indonesian

economy, forex risk and deterioration in credit and capital markets.

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Mapletree

STI

Ong Kian Lin(65) 6531 9810e-mail: [email protected]

(S$ m) FY09 FY10 FY11F FY12F

Revenue 85.8 129.4 125.6 123.6

NPI 81.2 85.3 82.9 81.6

Distributions 60.1 47.9 50.4 51.4

Distr yield (%) 8.4 8.2 8.6 8.7

P/NAV (x) 0.7 0.6 0.7 0.7



P age 2 17 Feb ruary 2011

LMIR T rus t

Exhibit 1: 4Q DPU Details

Source: LMIR's FY10 results

LMIR's Key Financial Data

LMIR Results 4Q10 4Q09 % Chg 3Q10 % Chg

Year Ended 31 Dec (S$ m) (S$m) (S$m) (YoY) (S$m) (QoQ)

Gross revenue 32.2 22.7 41.6% 33.8 -4.7%

Net property income 21.1 19.7 6.8% 22.2 -5.1%

Interest income 0.3 0.6 -45.0% 0.4 -9.7%

Financial expenses -2.4 -2.4 -0.3% -2.4 -0.8%

Total admin expenses -1.9 -1.8 5.5% -1.9 0.1%

Earnings before other credits/revaluations 17.1 16.1 6.1% 18.3 -6.3%

Other credits inc realised forex gains 4.9 -15.2 nm 5.7 -14.1%

Earnings before revaluation 22.0 0.9 2428.0% 24.0 -8.2%

Change in fair value of invt ppty 76.4 98.8 -22.6% 0.0 nm

Profit before tax 98.4 99.6 -1.2% 24.0 310.9%

Profit after tax 83.2 80.2 3.7% 18.8 341.7%

Total distribution 12.0 12.4 -3.3% 11.7 2.5%

Units in issue (m) 1,081.7 1,074.8 0.6% 1,079.9 0.2%

DPU per unit (S cents) 1.11 1.16 -4.1% 1.09 2.0%



P age 3 17 Februa ry 2011

LMIR T rus t

LMIR Trust's Key Financial Data

EARNINGS FORECAST BALANCE SHEET

Year Ended 31 Dec (S$m) FY09 FY10 FY11F FY12F As at 31 Dec (S$m) FY09 FY10 FY11F FY12F

Gross revenue 85.8 129.4 125.6 123.6 Cash 111.3 110.0 123.3 127.6

Net property income 81.2 85.3 82.9 81.6 Trade and other receivables 20.8 20.2 25.1 24.7

Management fees -5.7 -6.4 -6.0 -5.8 Investment properties 1056.0 1082.0 1062.3 1037.0

Trustee fees -0.2 -0.2 -0.3 -0.3 Total assets 1188.2 1212.5 1210.8 1189.3

Financial expense -8.8 -9.5 -9.3 -9.3 Total current liabilities 31.5 41.0 46.5 46.1

Other credits -91.8 -6.6 0.0 0.0 Other financial liabilities 143.0 144.8 153.4 153.4

Revaluation net forex change 98.8 76.4 -24.1 -26.3 Total non-current liabilities 265.2 269.6 270.7 262.8

Tax -29.3 -29.4 -10.0 -9.1 Total liabilities 296.7 310.6 317.2 308.9

Net profit after tax 45.9 110.3 34.8 32.4 Unitholders' funds 891.5 901.9 893.5 880.4

Income to be distributed 60.1 47.9 50.4 51.4 Total liabilities & equity 1188.2 1212.5 1210.8 1189.3

CASH FLOW

Year Ended 31 Dec (S$m) FY09 FY10 FY11F FY12F KEY RATES & RATIOS FY09 FY10 FY11F FY12F

Net operating cash flows 70.3 51.0 62.4 61.5 Units outstanding (m) 1074.8 1081.7 1089.3 1095.3

Net investing cash flows 1.5 -1.6 0.9 0.9 DPU (S cents) 5.0 4.4 4.6 4.7

Bank borrowings 0.0 0.0 0.0 0.0 CFPS (S cents) 6.5 4.7 5.7 5.6

Distributions paid -44.8 -48.3 -50.4 -51.4 NAV (S$) 0.8 0.8 0.8 0.8

Funds from unitholders 0.0 0.0 0.0 0.0 NPI margin (%) 94.7 65.9 66.0 66.0

Net financing cash flows -54.0 -49.0 -57.1 -58.1 Distr to revenue (%) 70.1 37.0 40.1 41.6

Net cashflow 17.7 0.4 6.2 4.3 Distr yield (%) 8.4 8.2 8.6 8.7

Net effect of exchange rates -0.9 -1.8 0.0 0.0 P/CF (x) 9.2 11.4 9.4 9.6

Cash at beg of year 94.5 111.3 117.1 123.3 P/NAV (x) 0.7 0.6 0.7 0.7

Cash at end of year 111.3 110.0 123.3 127.6 Total Debt/Total Assets (x) 0.1 0.1 0.1 0.1

Source: Company data, OIR estimates



P age 4 17 Feb ruary 2011

LMIR T rus t

For OCBC Investment Research Pte Ltd

Carmen LeeHead of ResearchPublished by OCBC Investment Research Pte Ltd

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report holds NIL shares in the above security.

RATINGS AND RECOMMENDATIONS: OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading oriented.- However, OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. OIR’s Buy = More than 10% upside from the current price; Hold = Trade within +/-10% from the current price; Sell = More than 10% downside from the current price.- For companies with less than S$150m market capitalization, OIR’s Buy = More than 30% upside from the current price; Hold = Trade within +/- 30% from the current price; Sell = More than 30% downside from the current price.

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2011-Feb-17 - OCBC - Lippo-Mapletree