JAKARTA (TheInsiderStories) – Meikarta “Shenzen of Indonesia” project bribery case has dragged several Lippo Group’s top officials and tarnished its reputation. This chaotic situation is predicted to impact consumers trust, property marketing sales, and in the end, company cash inflow.
Indonesia’s anti-graft body has detained four alleged briber, Billy Sindoro as Lippo Group‘s operational director, Taryudi and Fitra Djaja Purnama as consultants, also Henry Jasmen as the group employee. Now, the Corruption Eradiction Co
Not only questioning Lippo’s internal governance, the smearing-reputation can break investors and consumers trust. It will also slowdown Meikarta sales and give higher uncertainty for people who have already bought the property.
The property project development in Bekasi, West Java, also could be delayed and buyers’ installment may halt. If this happened and the project requires more capital or unable to be self-funded, the group owned by Riyadi family may need to inject capital.
This year, Lippo’s revenue can give temporary liquidity relief to company. But it’s not enough.
In the first quarter, PT Lippo Cikarang Tbk (IDX: LPCK) booked Rp319.63 billion (US$22.04 million) revenue, a declining by 28.5 percent compared to last year. Its profit also fell more than 50 percent to 80.79 billion Rupiah.
Meikarta project is developed by PT Mahkota Sentosa Utama, owned 49.99 percent by Lippo Cikarang and 54 percent by PT Lippo Karawaci Tbk (IDX: LPKR).
Moody’s Investors Service has rated the bribery case to have limited financial impact on Lippo Karawaci, remains with B3 ratings and negative outlook. Whilst the public listed’s ratings do not incorporate any cash-flow expectations from the Meikarta project or from Lippo Cikarang.
But this may aggravate Lippo Karawaci’s poor liquidity and further drive up the yield-to-maturity on the company’s outstanding US dollar bonds, says by Moody’s.
As of October 17th, the yield-to-maturity on Lippo Karawaci’s 2022 and 2026 bonds has increased by an average of 8 percent since their date of issuance. This means the company will have to pay more interest expense as it refinances its debt coming due over the next 12-18 months. While, Lippo Karawaci has around IDR1.3 trillion of debt coming due in 2018 and 2019.
Stocks market responded negatively on the issue. Lippo Group stocks, not only its property business, closed in the red zone. LPKR stock shrink 4.86 percent to Rp274. Its year-to date has fallen 44.08 percent. And from early 2018, Lippo Cikarang stocks recorded 56.81 percent cutback to Rp1,330.