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LMIR: 4Q 2011 results.

Friday, February 17, 2012

In recent weeks, I noticed that in some publications including The Business Times which compare high yielding stocks in Singapore, LMIR's distribution yield was overstated probably based on historical quarterly DPU. Historically, LMIR's quarterly DPU hovers at around 1c.

Recently acquired Pluit Village.

Personally, I estimated the DPU after acquisitions and rights issue to be closer to 3.26c per annum which works out to be 0.815c per quarter.

As a reader correctly pointed out not too long ago, the first DPU after the recent acquisitions and rights issue is likely to be lower because the acquisitions would have only been completed in December 2011. Indeed, DPU for 4Q 2011 (Oct to Dec 2011) is 0.53c, including contributions from recent acquisitions for the period of 6 December to 31 December 2011.

Income distribution is payable on 16 March.

Plaza Medan Fair.

This lower DPU likely disappointed Mr. Market as LMIR's unit price dipped from the start of the trading day, closing 1.5c lower at 39c but not before touching a low of 38.5c. If we were to annualise the quarterly DPU of 0.53c, it would mean an annual DPU of 2.12c or a distribution yield of only 5.3% based on a unit price of 40c. This would be a mistake, however.

Any investor with a longer term perspective should not worry as this much lower quarterly DPU is probably temporary. Over time, even my estimate of 3.26c in annual DPU should be surpassed, all else remaining equal.

Some numbers:

NAV/unit: 60c.
Gearing: 8.7%
Ave. cost of debt: 6.7% p.a.

See slides presentation: here.

So, should we rush to buy units of LMIR now? Not me. Why?

Although its unit price has declined from the ascribed fair value of 41c which sees a distribution yield of 7.95% with an estimated annual DPU of 3.26c, there could be more room to fall. This could happen once the REIT goes XD.



A doji was formed today as price closed lower. A doji suggests indecision and this could be due to the fact that the REIT is still trading CD. However, a gapping down is bearish. The very high volume on a down day reinforced the bearish picture.

The MACD has made a bearish crossover with the signal line which suggests that positive momentum has weakened. MFI and Stochastics are nowhere near oversold and we don't have a buy signal. If anything, the bearish divergence we spotted some time back is being played out now. The uptrend is broken.

It remains to be seen if immediate support at 38.5c as provided by the declining 100d MA would hold. If it should give, next support is at 37c which is where we find the upturning 50d MA.

Related post:
LMIR: A slow and steady climb.

12 comments:

Ray said...

Everyone should LMIR now!!!! So that I can snap back cheaper! Hahaha ;)
I think you know where I stand on this stock.

AK71 said...

Hi Ray,

If its unit price were to retrace to stronger supports, I would very likely buy some too. :)

garren said...

shares script increases by 100% for the recent purchase but Q4 revenue growth is only 14.8% factoring ~ 1mth revenue from the new purchase.
obviously the sponsor has gotten a great deal! great dilution for the shareholders resulting in poorer yield. worry about future purchases….
vested due to the rights.

AK71 said...

Hi garren,

For sure, the results are not fantastic. In fact, I had my reservations about the acquisitions and rights issue when they were first made known. My blog posts on the subject back then show my concerns.

However, taking all the numbers into consideration. There is potential for the REIT to do better in time if managed prudently.

With gearing lower than ever, it has more debt headroom for future acquisitions which would increase DPU. If geared up to the optimal 35% level for yield accretive purchases, we could see DPU bumping up some 25% or so.

For now, we can only wait and see. Hence, Mr. Market's reaction.

I only hope that no one here chased LMIR as its price broke 40c per unit recently

Ray said...

Well I divested more at 40.5cents so that now look to be a good move. I didn't do so well for other stocks though :(

Howyuan said...

Kind of disappointed, but did unload some 30% when other people chased it up. I am ready to go in anytime :)

Their report hinted about a collection of mature malls by parent. Hope they know what they are doing.

Calvin said...

Hi AK,

Garren actually asked me the same question. Here's my answer from my website.

I do agree that the rights issue was at a very low price of $0.30, I would have preferred that the rights be raised at a higher price so as to get more capital with less shares issued. However, the fact remains that the issue price was at $0.30 and the only way not to get diluted was to subscribe. Also, the rights issue presented a good opportunity to invest in LMIR at very cheap prices.

The reason for the huge dilution and yet low contribution from the revenue is due to the fact that issue price was at a very low $0.30, only 1 month of contribution and the fact that Pluit Village is still under rented. If the issue price was higher, the dilution would have been lower and the contribution would be higher.

With regards to the purchase being a great deal for the sponsor, I do agree that its definitely a great deal considering that Pluit Village was only 75% occupied at the time of purchase. It’s now up to LMIR to drive up occupancy at Pluit Village. Plaza Medan Fair was bought from a non related entity. However, the value of the purchase itself is actually ok, considering that leverage ratio actually dropped to 8.7% even though the cash used for purchase exceeded the net proceeds from the rights issue.

I also wrote about this in my post
http://www.investinpassiveincome.com/results-release-of-lippomalls-reit-fy2011-disappointing-performance-or-not/

Calvin
http://www.investinpassiveincome.com

AK71 said...

Hi Ray,

As long as you have made the money you want to make from any transaction, I think you have done well. :)

AK71 said...

Hi Howyuan,

I am left with 20% of my investment in the rights units from nil paid rights, having sold the rest as the REIT's unit price rose. So, like you, I am waiting for price to weaken to stronger supports before loading again.

The REIT's even lower gearing now gives it lots of debt headroom for yield accretive acquisitions. Let us see how things go.

AK71 said...

Hi Calvin,

In an earlier blog post here in ASSI, I think we have discussed the matter of rights issues and how much discount they should be given.

I remember our opinions differed in this matter.

For readers who might be interested in our exchange of comments on this matter, here is the link to the blog post and its comments section:

The rights issue has to be priced with a large discount to make it more attractive to investors.

Nonetheless, thank you for sharing your thoughts on LMIR's latest results. :)

SnOOpy168 said...

AK

After the rally and yesterday's sell down,will 35.5-36.5c be a likely support ? I am still learning to read the Fibo charts... thanks

AK71 said...

Hi SnOOpy168,

There is no saying if that level of support would be tested in future but if should be tested, it is likely to be a strong support. :)

Fibo lines show where the resistance and supports are but it does not say anything about momentum. For that, you need to look at the MACD, RSI, MFI and Stochastics.

Couple Fibo lines with momentum oscillators and you will have a better inkling as to when could be a better time to buy or sell. :)

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