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Thursday, February 12, 2015

LMIRT FY14 Results - Why are the numbers looking better?

LMIRT has just announced their full year results this morning and it appears that the fourth quarter is doing pretty well. Sillyinvestor has done a very good job dissecting the figures especially for the projection of the newly acquired Kemang figures so I will just cover it very briefly.





There are 3 things that basically I wanted to highlight in this post:

DPU Projection

As you probably already know, there was an advance distribution of 0.55 cents prior to the placement for the period from 1 October to 16 Dec 2014. That is a total of 77 out of 92 days there for the same portfolio without the Kemang portfolio. Assuming without the acquisition of the Kemang mall, the distribution for the 4th quarter would be at 0.55 cents / 77 * 92 = 0.66 cents. That's not looking particularly good there.

Working our way back at the actual distribution of 0.71 cents for the 4th quarter, we can assume that the Kemang acquisition has contributed 0.71 - 0.66 = 0.05 cents for the 15 days (92-77) left in the 4th quarter calendar. However, we need to note that this was not fully paid via internal funds but through a placement, so we will need to account for the bigger number of units outstanding here.

Using a quick discounting methodology, we will have an incremental 2,701,802,668 - 2,462,648,552 = 239,154,116, which is roughly 10.8% incremental from the existing number of units. Discounting the contribution figure by this, we should be expecting 0.05 cents / 1.108 = 0.04 cents. Pro-rating this to a full quarter contribution, we are potentially looking at 0.24 cents. 

Before we add them together, we now have to discount the same estimated full quarter contribution from the existing portfolio at the same incremental rate of 10.8%, we will get 0.66 cents / 1.108 = 0.59 cents for the existing portfolio.

Adding the two together, we will have 0.24 + 0.59 cents = 0.83 cents for the full quarter moving forward. However, do note that some caveat applies. 

1.) While accounting for the Kemang, we may have neglected the power of rental reversion which they have achieved in the new quarter. If so, we may have overstated our Kemang projection figures.

2.) The estimated 0.55 cents for the advance distribution may be understated given that it is only an estimate. Assuming we pro-rate them to a full quarter, they only amount a total of 0.66 cents which is ridiculously low.


Forex Translation Gain/Loss

The second thing I would like to highlight is on the forex translation.

There are many investors who put a lot of focus on this one.

As I had previously mentioned, the gain or loss on translation is very limited due to the currency hedging the company had in place. In other words, should the currency moves either way, the company will not be expecting a major upside so I will treat this as negligible.



Take a look at the one highlighted and strip out the one highlighted in red, and you get about 900K of positive income there. The one highlighted in red is due to the income from loss of Kramat Jati Indah Plaza so it should not be treated as forex translation gain/loss.


Occupancy Rate %

It's pretty weird that their latest slides are missing the occupancy rates there. 

I wonder if it's done on purpose or something amiss is about to happen. It appears like they do not want to show the individual mall performance to the public. However, they did mention that portfolio occupancy is now at 94.7%, a slight decline from the 95.0% we last see in Q3. My suspect is the occupancy is going to trend lower especially on some of the bigger malls like Pluit Village. Binjai and Kramat are doing fine as they have a compensation from the loss of income mentioned earlier.


Final Thoughts

The Kemang acquisition is definitely accretive.

I've mentioned this in my previous LMIRT post and thought they could have squeezed a better deal by doing the placement earlier at $0.40 rather than $0.34. Nevertheless, this looks like a good deal that is going to contribute to the bottomline for the company.

Do note that due to the acquisition of Kemang partly funded via internal funds, the balance sheet looks very much weaker now than before. I am not only talking about the gearing in general, but the amount of cash available in the balance sheet to do any further acquisition or AEI. 100% of the assets are also already encumbered so I am expecting another placement/rights issue to strengthen their balance not very long as soon as there are opportunities to do so.




The current price is probably fair to account for the plus and minus of the company. Those who managed to get at $0.30 are probably sitting on a good safety there but at current price I don't see why we should be adding further.

As always, I might be biased in my opinion, so please treat them with a pinch of salt.


15 comments:

  1. Replies
    1. Hi jfree

      If you can catch this at the right price, it's still a value buy.

      The question is whether we can stretch to catch buying this at the right price or not :)

      Delete
  2. Hi B

    .55 cents is the projected advance payment in December. They did had a caveat mentioning it will be subjected to changes pending full year results and in this case, the final confirmed distribution is 0.57 cents and not 0.55 cents. So the operating numbers should be a a tad weaker than last quarter but a tad higher than what u calculated.

    I noticed the glaring Missing occupancy rate. It is very likely that Pluit village is getting worse. Maybe u can fire the salvo at them during AGM and ask them why they cannot disclose the proportion of GTO tenants and revenue. They didn't reply to my enquiry

    While the calculation we did might be different, we have the same conclusion regarding 30 cents as a reasonably good deal and fair at current price. Given it is not a great company, maybe we must demand good price than fair price. This is what I learned.

    But, I am rate happy with the results given the low expectation

    ReplyDelete
    Replies
    1. Hi Sillyinvestor

      Thanks for the correction.

      I am no longer vested in this counter so I think you would know better than me :)

      The occupancy rate didn't decline very much from the last report. I think they just miss this for this round and should reinstate back in the next results. I think it's ridiculous not to show the occupancy rate for a retail mall reit.

      Delete
  3. Hi B,

    Blogs, newspapers, analyst reports, TV etc are all biased. I may be wrong, I am more general in my approach for LMIRT. For longer term, I think Indonesia growing middle-class is still the driving factor for my buy. But like what we are know, the tolerance of shareholder dilution is getting thin! We shall see....

    ReplyDelete
    Replies
    1. Hi Rolf

      Long time no see!!! :D

      Qualitatively you are correct but I usually look deeper into the numbers and actions than the broad market sentiment of the economy as a whole. I think both quantitative and qualitative analysis need to be done.

      Delete
    2. Hi B,

      :-) had been traveling for last two weeks. Agree that both quan & qual important... For qual analysis I just follow your blog.. Haha..
      Definitely much more accurate than most pro!

      Excellent job here!

      Delete
  4. from the powerpoint slides, it seems it is stating "100% of LMIRT’s S$ 1.84 billion
    asset portfolio remained unencumbered". Is this a mistake by LMIRT?

    ReplyDelete
    Replies
    1. Hi John

      Apologies, unencumbered should be the right words.

      The idea to allow assets to be unencumbered is to allow their assets to be more attractive and sell-able and is one of the requirement to gain easier loans from the bank.

      Delete
  5. Hi B,

    As usual good job on dissecting LMIRT. I did my own preliminary investigation on this REIT and the outcome looks not too shabby. I note that they have realised most of the gain in their fx hedge in YTD 2014. Looking at the flattish trend in IDRSGD exchange rate and the accomodative stance by MAS, I do not foresee LMIRT having to do much fx hedging in the near term.

    DPU growth is a concern though. There was only one growth year since listing in 2007. Nonetheless, if current Q4 performance is sustainable, LMIRT at 34 cents still looks interesting.

    ReplyDelete
    Replies
    1. Hi SRSI

      Thanks for your kind comment.

      The forex translation is as best as it could get. I doubt they will be able to gain anything extra other than what they already earned for this year.

      I don't doubt that the DPU will be better next year than the past year. But there is a concern that their balance sheet is now getting weaker in terms of liquidity funds and they may need to raise equity again should there be any needs for working capital or further AEI or acquisitions.

      Delete
  6. Hi B,

    As usual good job on dissecting LMIRT. I did my own preliminary investigation on this REIT and the outcome looks not too shabby. I note that they have realised most of the gain in their fx hedge in YTD 2014. Looking at the flattish trend in IDRSGD exchange rate and the accomodative stance by MAS, I do not foresee LMIRT having to do much fx hedging in the near term.

    DPU growth is a concern though. There was only one growth year since listing in 2007. Nonetheless, if current Q4 performance is sustainable, LMIRT at 34 cents still looks interesting.

    ReplyDelete
  7. B : nice work! Lippo is still in my watchlist ;-)

    ReplyDelete
    Replies
    1. Hi Richard

      Thanks!!!

      I understand you are eyeing to add some Reits into your portfolio for this year.

      Delete

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