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LMIR is one of my long time investments. My only grouse is with its losses which stem from foreign exchange forward contracts. In 1Q 2011, it lost $2.1m from these contracts. Some degree of hedging is necessary, I believe, but in an environment which has seen the Indonesian economy and its currency strengthening quarter after quarter, 100% hedging is unnecessary. Distributable income could have been almost 20% higher if not for these contracts.
DPU: 1.17c
Payment date: 31 May.
Gearing: 10%.
NAV/unit: 86c.
See presentation slides here.
Related post:
LMIR: 4Q FY2010 results.
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6 comments:
i owned a small position at 0.475 last time. good to buy more? hmm...
Hi Hwang,
Although this REIT is trading at a huge discount to NAV and it has very low gearing of only 10%, at the current price of 56c a unit and an annualised distribution yield of 8.36%, I believe that it is almost fairly valued.
Fair value would be about 58.5c a unit which would give us a distribution yield of about 8%.
Of course, we could have catalysts in the form of acquisitions from its sponsor, the Lippo Group, in future which could bump up distributable income.
With gearing at 10%, it is also unlikely that the REIT would have to issue rights to fund acquisitions. If this were to happen, then, buying at the current price could be a steal.
Your call. ;)
Yea.. they are not like first where rentals are in sgd....
that is a concern for them if sgd keeps strengthening...
Hi WK,
If the S$ keeps strengthening against the Rupiah significantly, then, the management would have done the right thing to stay 100% hedged.
However, the Rupiah is not the US$ or the Pound Sterling. The Rupiah is the currency of an economy that, together with China and India, did not go into a recession during the last financial crisis.
I have questioned the need to be 100% hedged for quite a while now and one wonders if the past (short lived) CFOs of the REIT had the same question.
Revenue increase 40% a year ago but distribution is less. My goodness. They continue to feel right about their strategy. Lippo also own First REIT. Why the difference?
Hi left_ray,
LMIR and First REIT have different managements. LMIR collects its rent in Rupiah while First REIT collects its rent in S$. ;)
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