The property developer, PT Lippo Karawaci Tbk (IDX: LPKR) prepared capital expenditure Rp4 trillion (US$285.71 million) in 2021 - Photo: Special

JAKARTA (TheInsiderStories) – The property developer, PT Lippo Karawaci Tbk (IDX: LPKR) set the marketing sales Rp3.5 trillion (US$250 million) after achieved Rp2.67 trillion in 2020, or up 45 percent from the previous year. To support the targets, in the issuer prepared capital expenditure Rp4 trillion.

The targets, said the CEO, John Riyadi recently, will be supported by the multiple landed housing launches. He rated the property demand has recovered since the third quarter of 2020 and sees the businesses will rebound again driven by purchasing power in the next two to five years.

In addition, said the oldest son of James Riyadi, Bank Indonesia has lowered the interest rate to support the mortgage loans growth in the country. Lippo Karawaci also noted that the current level of home ownership in Indonesia is still 80 percent and in Jakarta was around 48 percent and became the opportunity by the real estate players.

The unit of Lippo Group also expects to complete the sale of Lippo Mall Puri to Lippo Malls Indonesia Retail Trust (LMIRT) in this month, eliminating uncertainties around the timing and execution of its asset sales. The net proceeds from the mall sale is estimating to be around Rp1 trillion, including the return of S$40 million ($30.07 million) in financing provided to the real estate investment trust manager.

Based on the informations, Moody’s Investors Service has affirmed the B3 corporate family rating of Lippo Karawaci and backed senior unsecured rating of the bonds issued by its unit, Theta Capital Pte. Ltd. The outlook on all ratings is stable.

“The ratings affirmation reflects our expectation of an improvement in Lippo Karawaci’s operating cash flow over the next 12-18 months, helped by growth in core marketing sales and a reduction in rent payments to First REIT,” says Jacintha Poh from Moody’s in her latest report.

However, said the analyst, Lippo Karawaci remains reliant on asset sales to supplement cash needs at the holding company level. The company will also need to constantly rollover its short-term credit facilities for liquidity to be adequate,” adds Poh.

The stable outlook reflects Moody’s expectation that the liquidity at the holding company level will remain adequate until the end of 2021, but will turn weak after if the issuer is unable to rollover its short-term credit facilities. Over the next 12 – 18 months, an improvement in operating cash flow will also be supported by a reduction in rent payments, following the restructuring of master lease agreements between the developer and First REIT.

The agency also expects total rent payments at the holding company level will be around Rp700 billion annually in 2021 and 2022, compared to around Rp1 trillion in previous years. Lippo Karawaci‘ liquidity at the holding company level is weak over the next 18 months because of the maturity of its Rp970 billion short-term loan facilities.

As of 30 September 2020, the investment firm had cash and cash equivalents of around Rp3 trillion at the holding company level, which combined with the expected IDR1 trillion of net proceeds from the sale of Lippo Mall Puri will only be sufficient to cover its operating cash needs of Rp3.1 trillion until first half of 2022 but not the debt obligations of Rp970 billion.

Moody’s has also considered the founding family’ concentrated ownership of Lippo Karawaci. However, this risk is mitigated by the oversight exercised through the presence of strategic minority shareholders on the board and partially balanced by demonstration of support from its key shareholder.

The holding firm is a listed property company in Indonesia, with a sizable land bank of around 1,411 hectares as of Sept. 30, 2020. It owns and manages — either directly or via its real estate investment trusts — 56 malls, 39 hospitals and 10 hotels. Lippo Karawaci also holds a 58 percent stake in LMIRT, following the completion of the latter’ rights issue in January 2021.

US$1: S$1.33, Rp14,000

Written by Editorial Staff, Email: theinsiderstories@gmail.com