Lippo Malls Indonesia Retail Trust raises Q3 DPU as gross revenue policy stabilises

LIPPO Malls Indonesia Retail Trust (LMIRT) upped its third-quarter distribution per unit (DPU) to 0.56 Singapore cent, from 0.49 Singapore cent before, in results released on Thursday.

Distributable income rose by 29.5 per cent year on year in the three months to Sept 30, to S$18 million, the manager said, as net property income grew by 11.8 per cent to S$44.1 million.

Gross revenue, which includes car park income and service charge and utilities recovery, came in higher by 6.8 per cent, at S$69.2 million.

LMIRT's malls have switched to collecting service charges and utilities recovery charges directly from tenants and pay maintenance and operation costs, after new government rules that required tenants to withhold income tax on these charges took effect in Indonesia. The latest reporting period was the first full quarter where the Reit's financial results reflected the direct collection of these charges.

The weighted average lease expiry by net lettable area was four years, as at Sept 30, while the portfolio occupancy rate averaged 92.2 per cent. Meanwhile, gearing was 34.7 per cent, against 34.6 per cent as at Dec 31, 2018, with a weighted average debt maturity of 3.4 years.

The third-quarter books closure date is Nov 15, and the DPU will be paid out on Nov 29.

The latest payout takes DPU for the nine months to 1.71 Singapore cents, against 1.75 Singapore cents in the year before, with distributable income flat at S$49.8 million.

Net property income increased by 1.6 per cent to S$128.6 million for the period, while gross revenue went up by 22.1 per cent to S$203.4 million.

The manager noted in its outlook statement that certain master leases at Lippo Mall Kemang in South Jakarta, which are now held by wholly owned subsidiary Kemang Mall Terpadu, will expire on Dec 16 - a change that is expected to have a negative impact on rental income.

On a pro forma basis, distributable income for the nine months could have taken a 17.7 per cent hit, on a 8.7 per cent decline in net property income, if the master leases expired on Jan 1.

But James Liew, chief executive of the manager, said in a statement that the firm "is actively managing the tenancy mix of Lippo Mall Kemang", including converting the area previously occupied by department store Matahari into specialty and entertainment outlets.

As for the car park business at Lippo Mall Kemang, which has been negatively affected by the rise of ride-hailing services, plans for valet services failed and the parking lots will now be turned into "crowd-pulling services or rental-generating tenants", as a mitigation measure.

Units of LMIRT added half a Singapore cent, or 2.13 per cent, to S$0.24, before the results.