My analysis of LMIRT (Lippo Mall)

I invested $80,000 in Lippo Mall. It has dropped $50,000 in value, or more than half of my invested sum. The current share price is $0.062.

Lippo Mall is having a rights issue to purchase a "flagship mall" in Jakarta. It is carrying out a rights issue at $0.06 to raise $180 million for the purchase of this mall. This has caused the share price to drop from $0.10 to $0.062 over the past few months.

Here are the details of the malls owned by LMIRT in Indonesia.
http://www.lmir-trust.com/

They own 30 malls with a portfolio value of $1,826 million and a net letable area of 913,958 sm. This works out to $185 per sf (compared to $2,000 psf in smaller malls in Singapore).

Furthermore, the share price for LMIRT is only 28% of asset value. A shareholder of LMIRT pays only $185 X 0.28 = $52 per sf of retail space in a mall in Indonesia.

In the chart below, the price to sale of LMIRT is 1.1. The average for the 4 other REITS is 11.67. It LMIRT has a price to sales ratio of 11.67, the price would be $0.65. On this metric, LMIRT is undervalued by 90%. Insane, right?

There could be several problems with LMIRT that account for its severe undervaluation. There is a risk that it may go bankrupt, if it does not earn enough to pay off its debt.

I think that this is not likely to happen. The net operating income (mainly from rental less expenses) is $100 million (trailing 12 months) compared to interest expense of $45 million. This was probably the worse case situation due to the lockdown caused by the pandemic. When the malls open in 2021, the net operating income should be higher than the current value.

Furthermore, I expect that the Lippo Group, which is the sponsor of LMIRT, will support this trust and ensure that it does not go bankrupt.

In view of the under valuation of this stock (as suggested by the price to sales ratio), I have decided to buy more stock to average down my cost and also to take up the rights issue.

I am not able to see any report from the stockbrokers. So, I have to do my own analysis.

Tan Kin Lian

Note - this is not financial advice. Please do you own analysis before you decide to invest in this stock.