How LMIRT will be hit by weaker Indonesian currency

IDR declined 7.4% against SGD.

According to OCBC Investment Research, the IDR has weakened some 7.4% against the SGD since 28 Jun, with SGD1 buying IDR8558.25 as at 21 Aug, compared to IDR7922.96 on 28 Jun (Bloomberg).

"We understand that only ~65% of the cash flow from the properties for 2H13 are likely hedged for depreciation of IDR against SGD.

In addition, the weakening of the IDR against the SGD does not bode well for the valuation of LMIRT’s properties in SGD terms, which means that NAV would likely be affected negatively," said OCBC.

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To recap, LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls.

Total revenue (equivalent to gross rental income in 2Q13) fell 12.5% YoY due to the inclusion of service charge and utilities recovery income from the malls’ operational activities in 2Q12.

Such activities have been outsourced to a third party operating company with effect from 1 May 2012 and there is also a related decrease in expenses registered in 2Q13. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents.

Results for the quarter were in line with our expectations and consensus’. 1H13 DPU of 1.82 S cents forms 50.6% of our FY13 estimate of 3.6 S cents, which we maintain for now.