Company Update for 1H2020 Results

8 September 2020

REAL ESTATE EQUITY RESEARCH PRICE PERFORMANCE Lippo Malls Retail (LMIR) Trust SGX: D5IU Bloomberg: LMRT:SP ISIN Code: SG1W27938677

RECOMMENDATION: SELL Current Unit Price (as at 8 Sep 20): S$0.114

Market Capitalisation: S$333.7 million Issued Units: 2,926.8 million 52 Week Range: S$0.102 - S$0.245

COMPANY DESCRIPTION Source: Bloomberg Lippo Malls Indonesia Retail (LMIR) Trust is a Singapore-based real estate investment trust with a diversified portfolio of income-producing real estate properties in Indonesia. LMIR Trust’s current portfolio comprises 21 retail malls and 7 retail spaces across key cities in Indonesia.

SUMMARY In 1H2020, the LMIR Trust’s financial performance was negatively impacted due to the COVID-19 pandemic, which had resulted in the closure of all of the Group’s retail properties by early April. The Group reported total gross revenue of S$92.3 million in 1H2020, which is 31.2% lower compared to S$134.2 million in 1H2019. This was attributed to lower gross rental income due to the temporary closure of the Group’s retail properties, and lower service charge and utilities recovery given a 40% discount on service charge being extended to tenants. Lower property expenses of S$39.7 million were incurred in 1H2020, largely due to lower operating expenses, mainly utilities, repair & maintenance and other outsourced services. This resulted in net property income of S$52.6 million, which is 37.8% lower than S$84.5 million a year ago. After accounting for non-operating expenses, the Group reported an after-tax net loss of S$8.2 million for 1H2020. This loss made up of a S$17.0 million loss attributable to unitholders and S$8.8 million in returns to perpetual securities holders. Given a S$17.0 million loss attributable to unitholders, negative earnings per unit (EPU) of 0.58 cents was reported for 1H2020. At the same time, the Group reported distributions to unitholders of S$6.6 million, which translates into a first-half distribution per unit (DPU) of 0.23 cents.

RECOMMENDATION Since our initiation report issued on 3 January 2020, LMIR Trust’s share price has dropped sharply in late February and reached a low closing price of S$0.103 on 9 April 2020. The share price then rebounded to S$0.155 in mid-April and early June. In mid-June, however, the share price began to decline following a resurgence of COVID-19 cases in areas like Java and and has been hovering between S$0.113 and S$0.124. In terms of valuation, we derived an adjusted NAV per unit of 12.93 cents after factoring in the divestment of & Binjai Supermall and the acquisition of Lippo Mall Puri. This adjusted NAV per unit is lower than the reported NAV per unit of 27.73 cents as at 30 June 2020. We believe that this is largely due to the dilutive effect of the rights issue as part of the equity financing for the acquisition of Lippo Mall Puri. While we note that LMIR Trust’s dividend yield could remain attractive, we are inclined to believe that the acquisition of Lippo Mall Puri is likely to have a negative impact on LMIR Trust’s share price. Further, our financial projections indicate that the Group’s revenue and earnings performance could remain relatively weak in the months ahead. Given the above considerations, we have downgraded our recommendation from “buy” to “sell”. Our current recommendation largely reflects the concerns we have over the acquisition of Lippo Mall Puri, which we believe to be negative for LMIR Trust’s share price.

KEY FINANCIALS Revenue EPU P/E DPU Dividend yield NAV per unit P/B Full year, ended Dec 31 (S$ million) (cents) (x) (cents) (%) (cents) (x) 2019 actual 273.0 (0.15) n/m 2.23 19.6 28.20 0.40 2020 forecast* 218.7 (7.19) n/m 1.23 10.8 27.73 0.41 2021 forecast 252.1 1.54 7.40 1.53 13.4 - - Figures have been rounded *Current dividend yield of 11.49% based on trailing DPU of 1.31 cents. NAV per unit as at 30 Jun 2020. Contributor: Glendon Hoon Source: LMIR Trust, FPA Financial (+65 6323 1788)

www.fpafinancial.com 1 8 September 2020

CONTENTS

FINANCIAL REVIEW FOR 1H2020 ……………...... 3-5

PORTFOLIO PERFORMANCE ……………………..…………………………………………. 6-7

INDONESIA’S RETAIL SECTOR OUTLOOK ……...... 8-9

PROPERTY SALE AND ACQUISITION UPDATES ……………………………………... 10-12

SHARE PRICE PERFORMANCE REVIEW …………………………………...... 13

FINANCIAL PROJECTION REVISION ……………………………………………………. 14-20

VALUATION ………………………………………………………...... 21-23

INVESTMENT RECOMMENDATION ...……………………………………………………….. 24

DISCLOSURES/DISCLAIMERS ……………………………………………………………….. 25

www.fpafinancial.com 2 8 September 2020

FINANCIAL REVIEW FOR 1H2020

Financial performance

Owing to the COVID-19 pandemic, LMIR Trust commenced the temporary closure of its retail properties in late March and had closed all of its 23 retail malls and 7 retail spaces by 1 April 2020. The retail properties were then progressively reopened from mid-May. As of 3 July 2020, all of the Trust’s retail properties have resumed operations.

Owing to the temporary closure of the retail properties, the Group reported total gross revenue of S$92.3 million in 1H2020, which is 31.2% lower compared to S$134.2 million in 1H2019. This was contributed by a 35.6% year-on-year (y-o-y) decline in gross rental income to S$49.2 million in 1H2020 from S$76.4 million recorded in 1H2019. The lower gross rental income was attributed to the mall closures and the expiry of master leases in Lippo Mall Kemang on 16 December 2019. Additionally, car park income of S$2.9 million and other rental income of S$1.0 million were also lower by 68.8% and 33.4%, respectively, compared to a year ago. Further, a 40% discount on service charge was extended to tenants, which led to lower service charge and utilities recovery of S$39.2 million.

Total property expenses of S$39.7 million in 1H2020 were 20.1% lower than a year ago, largely due to lower operating expenses, mainly utilities, repair & maintenance and other outsourced services, during the temporary closure of malls. Thus, net property income registered S$52.6 million in 1H2020, which is 37.8% lower than S$84.5 million a year ago. After accounting for interest income of S$1.2 million, financial expenses of S$23.9 million, total administrative expenses of S$5.6 million and other losses (affected by hedging contacts, foreign exchange and amortization of intangible assets) of S$5.7 million, decrease in fair value of investment properties held for divestment of S$15.5 million (we will discuss in the “property sale and acquisition updates” section on page 10), income tax of S$9.3 million, withholding tax of S$3.3 million and deferred tax of S$1.3 million, the Group reported an after-tax net loss of S$8.2 million for 1H2020. This comprised a S$17.0 million loss attributable to unitholders and S$8.8 million profit attributable to perpetual securities holders. LMIR Trust had issued perpetual securities of S$140 million at a distribution rate of 7.0% per annum and S$120 million at a rate of 6.6% per annum in September 2016 and June 2017 respectively. For 1H2020, an accrued amount of S$8.8 million was reserved for distribution to perpetual securities holders. Given the S$17.0 million loss attributable to unitholders, negative earnings per unit (EPU) of 0.58 cents were reported for 1H2020, based on a weighted average number of units in issue of 2,913.1 million. At the same time, the total amount available for distribution to unitholders was S$6.6 million, which includes the use of S$3.4 million in retained income from previous quarters to offset the losses incurred in 1H2020 and distribute the residual to unitholders. Based on 2,926.8 million units in issue as at the end of 1H2020, a distribution per unit (DPU) of 0.23 cents was reported for 1H2020. The Group’s financial results for 1H2020 and statement on distribution are summarised in Exhibit 1 and Exhibit 2.

Exhibit 1: Financial results for 1H2020 1H2020 1H2019 Financial indicator S$ million S$ million y-o-y change Gross rental income 49.2 76.4 (35.6%) Total gross revenue 92.3 134.2 (31.2%) Net property income 52.6 84.5 (37.8%) Total return/(loss) for the period after tax (8.2) 32.7 n/m Total return/(loss) for the period after tax attributable to unitholders (17.0) 23.9 n/m EPU (cents) (0.58) 0.83 n/m Distribution to unitholders 6.6 33.6 (80.2%) DPU (cents) 0.23 1.15 (80.0%) Figures have been rounded n/m: not meaningful Source: LMIR Trust, FPA Financial

www.fpafinancial.com 3 8 September 2020

Exhibit 2: Statement of distribution 1H2020 1H2019 S$ million S$ million Total return/(loss) for the period after tax (8.2) 32.7 Add/(less) non-cash items and other adjustments: Manager's fee payable in the form of units 2.1 3.4 Amount reserved for distribution to perpetual securities holders (8.8) (8.8) Depreciation of plant and equipment 1.7 1.6 Decrease in fair value of investment properties held for divestment net of deferred tax 14.2 - Amortisation of intangible assets 1.1 1.1 Unrealised loss/(gain) on hedging contracts (8.9) 7.3 Unrealised foreign exchange (gain)/loss 9.9 (3.8) Total (loss)/income attributable to the period 3.2 33.6 Add back: retention sum from prior periods 3.4 - Amount available for distribution to Unitholders 6.6 33.6 Figures have been rounded SourceSource:: LMIRARA H-Trust,Trust, FPA FPAFinancial Financial

www.fpafinancial.com 4 8 September 2020

Capital management

As at 30 June 2020, LMIR Trust had total assets of S$1,969.0 million, compared with S$2,013.0 million as at the end of 2019. This was largely contributed by a decrease in cash and cash equivalents by S$62.4 million, which was mainly due to the repayment of its S$75.0 million Euro Medium Term Note (EMTN) notes upon maturity on 22 June 2020. However, an increase in the asset value of the Group’s investment properties, mainly due to the appreciation of the Rupiah (IDR) against the Singapore Dollar (SGD), had helped to offset some of the decline in total asset value. We note that the carrying values of the Group’s properties reflected in the latest balance sheet (as at 30 June 2020) are as at 31 December 2019 and adjusted for property enhancements to-date. Total liabilities amounted to S$897.7 million as at 30 June 2020, compared with S$937.1 million as at the end of 2019. This resulted in net assets of S$1,071.3 million, of which, S$811.7 million were attributed to unitholders and S$259.6 million were attributed to perpetual securities holders. With S$811.7 million in net assets attributable to unitholders, a net asset value (NAV) per unit of 27.73 cents as at the end of 1H2020, based on 2,926.8 million issued units. The balance sheet data as at 30 June 2020 and 31 December 2019 are summarized in Exhibit 3.

Exhibit 3: Balance sheet data as 31 Dec 2019 and 30 June 2020

As at 30 Jun 2020 As at 31 Dec 2019 S$ million S$ million Total assets 1,969.0 2,013.0 Total liabilities 897.7 937.1 Net assets 1,071.3 1,075.9 Net assets attributable to unitholders 811.7 816.3 No. of issued units 2,926.8 2,894.9 NAV per unit (cents) 27.73 28.20 Total debt 701.9 721.7 Gearing ratio (%)* 35.7% 35.9% Figures have been rounded *Refers to total debt over total assets Source: LMIR Trust, FPA Financial

We note that the Group drew down S$40.0 million and S$4 million from its revolving credit facilities in March 2020 and June 2020 respectively, and also fully repaid with internal cash its S$75.0 million EMTN notes. As noted above, the Group’s total debt decreased over the half year period to S$701.9 million as at the end of 1H2020 from S$721.7 million as at the end of 2019. As a result, the Group’s gearing ratio registered 35.7% as at 30 June 2020.

www.fpafinancial.com 5 8 September 2020

PORTFOLIO PERFORMANCE

Owing to the impact of COVID-19, we note from LMIR Trust that average portfolio occupancy registered 90.9% in 1Q2020, which was slightly below 91.5% in 2019. Average portfolio occupancy then further decreased to 88.2% in 2Q2020. Nonetheless, we also note that average portfolio occupancy has held up relatively well compared to historical rates, and has outperformed the industry average figures by Cushman & Wakefield. The details of the Group’s average portfolio occupancy are summarised in Exhibit 4.

Exhibit 4: Group’s average portfolio occupancy

Source: LMIR Trust

Meanwhile, monthly visitor traffic declined over the first 4 months of the year, with April recording a low of 1.5 million visitors as shown in Exhibit 5. However, visitor traffic picked up over the second quarter amid the reopening of the Group’s malls and easing of COVID-19 restrictions.

Exhibit 5: Monthly visitor traffic

Source: LMIR Trust

www.fpafinancial.com 6 8 September 2020

Further on the lease status for the Group’s properties, we note that the majority of lease expirations will take place in 2024 and beyond, as shown in Exhibit 6. We also note from LMIR Trust that approximately 37% of expired leases or those due to expire in 2020 have been renewed or committed for renewal. We further note that selected tenants have restructured their fixed rental leases into rentals based purely on gross turnover over the next 3-6 months. Shorter tenor leases have been offered for selected tenants to ensure occupancy rates maintained.

Exhibit 6: Lease expiry as at 30 June 2020

Source: LMIR Trust

www.fpafinancial.com 7 8 September 2020

INDONESIA’S RETAIL SECTOR OUTLOOK

According to Bank Indonesia’s latest Retail Sales Survey, Indonesia’s retail sales fell by 18.2% year-on-year (y-o-y) in 2Q2020 as represented by the decline in the Real Sales Index (RSI). This was a larger y-o-y contraction compared to the 1.9% decline in the first quarter. On monthly performance, Indonesia’s retail sales experienced a smaller contraction in June 2020 compared to May 2020. This is represented by a smaller y-o-y contraction in the Real Sales Index (RSI) of 17.1% in June 2020 compared to 20.6% in May 2020, as shown in Exhibit 7.

Exhibit 7: Monthly and annual real sales growth

Source: Bank Indonesia’s Retail Sales Survey – June

In June 2020, retail sales improvements were experienced across nearly all commodities surveyed, led by the Automotive Fuels commodity groups which experienced a smaller real sales contraction of 27.0% y-o-y as compared to -45.4% y-o-y in May. The stronger retail sales performance in June was attributed to the reopening of retail stores and outlets as the government continued to wind down large-scale social restrictions. The June Retail Sales Survey noted that further sales improvements are expected in July 2020 despite remaining in contractionary territory. As noted in Exhibit 7 above, the y-o-y contraction in the RSI is expected to moderate further to 12.3% in July 2020 from 17.1% in June 2020.

However, despite the improvements in June, retail sales could remain relatively subdued in 2020. With the impact of COVID-19, Indonesia’s National Development Planning Agency has projected the total number of unemployed people in Indonesia to reach around 7 million by the end of 2020. At the same time, household spending is expected to experience negative growth in a range of “-1.3% to 0%”, according to Indonesia’s Ministry of Finance. We thus foresee domestic consumer spending to remain weak in 2020, which will imply subdued retail sales. At the same time, we note that international tourist visits to Indonesia reached 3.09 million in 1H2020, down by about 60% compared to the same period a year ago. While we note that Indonesia has began negotiations on travel corridors with countries like Singapore, South Korea and China to ease travel restrictions for business trips and essential businesses, inbound leisure travel is unlikely to resume soon due to the ongoing uncertainty of the COVID-19 situation. For instance, we note that Bali has postponed its plans to reopen to international tourists in September, and travel to the island is currently ruled out till 2021. Thus, retail sales contributions from the tourism sector are likely to be weak for the rest of 2020.

www.fpafinancial.com 8 8 September 2020

Given the above, we note that retail sales performance could remain weak in 2020, which could reduce the demand for retail spaces. This may in turn exert a downward pressure on retail rents. However, we also note from Jones Lang LaSalle (JLL) that retail growth correction in Jakarta is expected to be short-lived as rents are likely to continue to be supported by a lack of supply and low vacancy rates. JLL noted that new completions scheduled for 2020 have been pushed back. At the same time, short-term leasing demand has been impacted by the COVID-19 pandemic, though most prime malls are nearly full. In the medium, JLL expects retail rents in Jakarta to experience annual growth of +/- 3 to 5% on the back of consistently healthy vacancy levels.

www.fpafinancial.com 9 8 September 2020

PROPERTY SALE AND ACQUISITION UPDATES

In our initiation report, we discussed LMIR Trust’s announced divestment of Pejaten Village & Binjai Supermall, and proposed acquisition of strata title units of Lippo Mall Puri. We will now provide an update on their developments.

Update on the divestment of Pejaten Village and Binjai Supermall

We noted in our initiation report that LMIR Trust had on 30 December 2019 entered into conditional sale and purchase agreements (CSPA) with NWP Retail, a joint venture between Warburg Pincus and PT City Retail Developments for a total sale consideration of Rp 1,280.7 billion (S$124.3 million). This had involved the divestment of Pejaten Village & Binjai Supermall at a sale consideration of Rp 997.4 billion and Rp 283.3 billion respectively.

On 26 June 2020, LMIR Trust’s manager (Manager), LMIRT Management Ltd, announced that the parties involved in the Pejaten CSPA and the Binjai CSPA (“Parties”) were in the process of discussing certain required amendments to the CSPAs prior to completion, citing the unforeseeable situation in the past few months arising from the COVID-19 pandemic in Indonesia. This included discussions on a potential downward adjustment to the sale consideration for both property assets. As a result, the long stop date for the proposed divestment Pejaten Village & Binjai Supermall was extended to 10 July 2020. Thereafter, an announcement on 11 July 2020 had noted on the extension of the long stop date to 17 July, and further to 23 July during another announcement made on 18 July.

On 24 July 2020, the Manager announced that the parties involved had negotiated, and on 23 July 2020, entered into a Supplemental & Amendment Agreement to amend the Pejaten CSPA (hereon known as the revised Pejaten CSPA) and Binjai CSPA (hereon known as the revised Binjai CSPA). Under the revised Pejaten CSPA, the sale consideration for Pejaten Village was Rp 890.6 billion, representing a 19.1% premium to the original acquisition price of Rp 748.0 billion. Under the revised Binjai CSPA, the sale consideration for Binjai Supermall was Rp 262.0 billion, representing a 10.3% premium to the original acquisition price of Rp 237.5 billion. Thus, the total sale consideration amounted to Rp 1,152.6 billion, or approximately S$113.2 million.

Further on 30 July 2020 and 3 August 2020, the Manager announced the completion of the divestment of Pejaten Village for Rp 890.6 billion and Binjai Supermall for Rp 262.0 billion respectively. This represents, respectively, a 10.7% and 7.5% discount to the previous sale consideration of each property. As a whole, the divestment of the two properties at S$113.2 million is a 8.9% discount to the total sale consideration of S$124.3 million as announced on 30 December 2019. Following the completion of the divestment of the two assets, LMIR Trust’s portfolio now comprises 21 retail malls and 7 retail spaces.

Meanwhile, we note that the net divestment proceeds would be approximately S$97.2 million. We also note from LMIR Trust that part of the net divestment proceeds would be intended for use to pay the divestment fees payable to LMIR Trust’s Manager in respect of the divestments, which amounts to a total of S$542,000. We will assume in our valuation that the remaining net proceeds of about S$96.7 million, after deducting for the S$542,000 payable to the Manager, will be retained as cash. Further, we will assume that the excess of the gross sale proceeds of S$113.2 million over the net proceeds of S$97.2 million, accounted for by items such as income taxes payable, professional fees and other expenses incurred in connection with the divestments, would be fully expensed.

www.fpafinancial.com 10 8 September 2020

Update on the proposed acquisition of strata title units of Lippo Mall Puri

We noted in our initiation report that LMIR Trust, through its wholly-owned Indonesia-incorporated subsidiary, PT Puri Bintang 1 (Purchaser), had on 11 March 2019 entered into a conditional sale and purchase agreement with PT Mandiri Cipta Gemilang (Vendor) to acquire strata title units of Lippo Mall Puri. The total consideration for the sale and purchase of Lippo Mall Puri was Rp 3,700.0 billion, or approximately S$354.7 million. Additionally, prior to the completion of the acquisition, the Vendor and Purchaser had agreed to enter into an agreement (Vendor Support Agreement) for the Vendor to lease uncommitted space at Lippo Mall Puri on a quarterly basis from the date of completion of the acquisition of Lippo Mall Puri to 31 December 2023. We also noted that LMIR Trust had on 2 September 2019 announced that deadline for the completion of the segregation process and the long stop date to complete the proposed conditional sales and purchase agreement had been extended to no later than 31 March 2020 and June 2020 respectively.

However, LMIR Trust’s manager on 1 April 2020 announced that the Purchaser and the Vendor had, on 31 March 2020, agreed to extend the deadline for the completion of the segregation process and the long stop date to complete the proposed conditional sales and purchase agreement to no later than 31 August 2020 and 31 December 2020 respectively. It was also announced that the total consideration for the sale and purchase of Lippo Mall Puri would remain at Rp 3,700.0 billion.

Revised purchase consideration and valuation

On 31 August 2020, the Manager announced that LMIR Trust reached an agreement for the proposed acquisition of the strata title units of Lippo Mall Puri from the Vendor at a revised purchase consideration of Rp 3,500.0 billion, or approximately S$330.2 million. The revised purchase consideration represents a 9.47% and 3.47% discount to the average of the two updated independent valuations with vendor support and without vendor support, respectively. LMIR Trust’s trustee and manager had commissioned independent valuers Cushman & Wakefield VHS and Colliers International Consultancy & Valuation (Singapore) to revalue Lippo Mall Puri. The average of the updated valuations of the property as at 30 June 2020 was reported to be Rp.3,866.0 billion (S$364.7 million) with vendor support and Rp 3,626.0 billion (S$342.1 million) without vendor support.

Estimated acquisition cost

The estimated total acquisition cost was reported to be approximately S$391.0 million, which would comprise the following:

(1) Purchase consideration of Rp 3,500.0 billion (approximately S$330.2 million) (2) Value Added Tax of Rp 350.0 billion (approximately S$33.0 million) (3) Land and Building Acquisition Tax of Rp 175.0 billion (approximately S$16.5 million) (4) Estimated professional and other fees and expenses of approximately S$11.3 million to be incurred by LMIR Trust in connection with the acquisition

At the same time, we note that the Manager has decided to voluntarily waive 50% of the acquisition fee payable to the Manager. The acquisition fee payable to the Manager will be satisfied via the issue of new units in LMIR Trust which shall not be sold within one year of the date of issuance.

www.fpafinancial.com 11 8 September 2020

Vendor support

With the changes involved, the Vendor Support Agreement would now see the Vendor agreeing to lease certain areas of the uncommitted space on a quarterly basis from the date of the completed acquisition of Lippo Mall Puri to 31 December 2024, for such amount of rent equivalent to the difference between the actual NPI for the relevant quarter and the target NPI. If the actual NPI exceed the agreed target NPI, 50% of such excess above the target NPI will be carried forward to the subsequent quarters and used to satisfy any subsequent shortfall between the actual NPI and the target NPI while the remaining 50% of such excess shall be retained by the Purchaser. Further, the Purchaser and the Vendor have agreed to the revised target NPI for each year over the period of the vendor support as shown in Exhibit 8.

Exhibit 8: Target NPI for each year over the period of the vendor support

Source: LMIR Trust

Method of financing

The Manager intends to finance the estimated total acquisition cost of S$391.0 million (save for the acquisition fees) through a combination of debt financing of up to S$120 million, comprising bank debt and a S$40 million loan facility from the Vendor and proceeds from a S$280.0 million rights issue as announced on 31 August 2020. As part of the rights issue, LMIR Trust’s Sponsor, PT Lippo Karawaci Tbk (Lippo Karawaci), has provided an irrevocable undertaking to take up its full pro rata stake in the rights issue, and apply for all the excess rights units not taken up by the other unitholders up to 100% of the total number of rights units. As of now, we do not know the specific details of the rights issue and will assume a 1-for-1 rights issue in our valuation analysis.

www.fpafinancial.com 12 8 September 2020

SHARE PRICE PERFORMANCE REVIEW

Following our initiation report issued on 3 January 2020, LMIR Trust’s share price dropped sharply in late February and had reached a low closing price of S$0.103 on 9 April 2020. The sharp decline in share price reflected concerns over the impact of COVID-19 on the Indonesia’s retail sector, and in turn the Group’s financial performance, as retail malls and businesses were forced to close. After bottoming out on 9 April 2020, the share price rebounded to S$0.155 in mid-April and also in early June. However, the share price began to decline in mid-June, following a resurgence of COVID-19 cases in areas like Java and Jakarta. With persistently high number of daily virus cases, the current situation in Indonesia remains uncertain.

Recently, we note that LMIR Trust’s share price has been hovering between S$0.113 and S$0.124. We also note that the share price remained unchanged at S$0.117 for 3 days since the announcement of the rights issue on 31 August 2020 (as discussed on page 11). On 3 September 2020, however, the share price fell to S$0.114 after it was announced that Moody’s had placed LMIR Trust’s B1 rating on review for a downgrade. We note that Moody’s review will focus on the following 3 areas:

(1) the funding structure of LMIR Trust’s acquisition of Lippo Mall Puri from the Vendor, a wholly-owned subsidiary of LMIR Trust’s Sponsor

(2) the extent and impact of linkages between LMIR Trust and the Sponsor after the acquisition, due to the sponsor's weaker credit profile, which is rated B3 Stable by Moody’s

(3) LMIR Trust’s ability to refinance its debt coming due in August 2021 and to obtain any waivers for any potential breaches of financial covenants on its bank loans due to weakening earnings caused by the COVID-19 pandemic.

Pertaining to (1) and (2), Moody’s highlighted concerns that there could be a significant growth in the Sponsor’s shareholding in LMIR Trust, given that it would apply for all the excess rights units not taken up by unitholders during the rights issue. We note that the Sponsor’s weak credit profile raises concerns on the Vendor’s ability to provide the support as spelled out in the Vendor Support Agreement. Further on (3), we note that LMIR Trust has a 5-year term loan of S$175.0 million maturing in August 2021 at an interest rate of 3.15% per annum plus SGD Swap Offer Rate.

www.fpafinancial.com 13 8 September 2020

FINANCIAL PROJECTION REVISION

In our initiation report’s financial projection, we adopted a forecasting approach that was based on the Group’s historical quarterly performance to project gross revenue. Specifically, we determined how each quarter is expected to perform based on the Group’s quarterly performance as a proportioning of a full year’s performance. This would take into account seasonal effects that would skew the performance in a particular period. We had then projected gross revenue to be S$295.8 million in 2020. However, owing to the COVID-19 pandemic, we believe that it would no longer be appropriate to adopt our previous forecasting approach. As such, we now discuss the revised approach for our revenue projection.

Revenue projection for 2020 and 2021

We have noted earlier on page 6 that the Group’s average portfolio occupancy has been negatively impacted by the COVID-19 pandemic. Average portfolio occupancy stood at 88.2% in 2Q2020, equivalent to a vacancy rate of 11.8% which is 4 percentage points higher than a year ago, as shown in Exhibit 9. Coupled with the temporary mall closures and expiry of master leases in Lippo Mall Kemang, this resulted in a 35.6% y-o-y decrease in gross rental income as noted on page 3.

Exhibit 9: Quarterly average portfolio occupancy and vacancy

2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Average occupancy rate (%) 91.5 92.2 92.2 91.5 90.9 88.2 Average vacancy rate (%) 8.5 7.8 7.8 8.5 9.1 11.8 Source: LMIR Trust, FPA Financial

Given the current economic climate, we would expect vacancy to remain high in 2H2020 as landlords face increasing pressure to strike a balance to between rental collection and maintaining tenancy. Currently, retail rents are unlikely to increase as landlords attempt to retain tenancy. At the same time, a negative economic outlook due to COVID-19 could push up vacancy. We thus see a possibility in 2H2020 where vacancy remains high even as retail rents are maintained or experience slight correction. Further, we note from LMIR Trust that its retail malls had operated for shorter hours in July, with tenant being charged pro-rated rental accordingly. As such, rental income is likely to remain relatively weak in 2H2020 despite the reopening of the malls retail businesses.

Considering that gross rental income had declined by 35.6% y-o-y in 1H2020 (as noted on page 3), we will assume a halved impact of about a 15% decline in gross rental income in 2H2020 to reflect the impact of subdued retail rents and high expected vacancy owing to the COVID-19 situation. Thus, the projected gross rental income in 2H2020 would be S$67.0 million = [0.85 x S$78.8 million in gross rental income for 2H2019]. This therefore implies a total projected gross rental income of S$116.2 million for 2020, given gross rental income of S$49.2 million in 1H2020.

www.fpafinancial.com 14 8 September 2020

Meanwhile, we note that gross rental income as a proportion of total gross revenue was about 53% in 1H2020, which is lower than the typical proportioning of about 57% during pre-COVID times, as shown in Exhibit 10. We will thus assume the same proportioning for 2H2020 as 1H2020, given the ongoing uncertainty of the COVID-19 situation in Indonesia.

Exhibit 10: Breakdown of the Group’s total gross revenue

3Q2019 4Q2019 2019 1H2020 Revenue breakdown S$ million % of total S$ million % of total S$ million % of total S$ million % of total Gross rental income 39.3 56.8% 39.5 56.8% 155.3 56.9% 49.2 53.3% Carpark income 4.5 6.5% 4.3 6.2% 18.2 6.7% 2.9 3.1% Other rental income 1.0 1.4% 1.0 1.4% 3.4 1.2% 1.0 1.1% Service charge and utilities recovery 24.5 35.4% 24.7 35.5% 96.1 35.2% 39.2 42.5% Total gross revenue 69.2 100.0% 69.5 100.0% 273.0 100.0% 92.3 100.0% Source: LMIR Trust, FPA Financial

Given the above, the projected total gross revenue for 2H2020 would be S$126.4 million = [1/0.53 x S$67.0 million]. With total gross revenue of S$92.3 million in 1H2020, the projected total gross revenue in 2020 would therefore be S$218.7 million.

For 2021, we would expect portfolio occupancy to gradually recover to historical levels of about 92-94% with the expectation of a more stabilized COVID-19 situation in Indonesia. This would potentially allow for a moderate growth in retail rents as occupancy improves. We thus assume a moderate 15% growth in gross rental income for 2021 when compared to 2020, accounting for the potential of a weaker first half during the recovery phase. Thus, a projected gross rental income of S$133.6 million = [1.15 x S$116.2 million of projected gross rental income in 2020]. Further, assuming gross rental income to make up 53% of total gross revenue in 2021, the projected total gross revenue for 2021 would be S$252.1 million = [1/0.53 x S$133.6 million].

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EPU projection for 2020 and 2021

Given our projected total gross revenue figures for 2020 and 2021, we now estimate the Group’s after-tax net income to derive projected EPU figures for the respective years. To do so, we will have to estimate the Group’s expenses, non- operating income and other adjustments such as changes in fair value of investment properties.

Property operating expenses

Property operating expenses include land rental, property management fees, property operating & maintenance expenses and other operating expenses. We note that land rental and property operating & maintenance expenses tend to be fixed costs which are incurred regardless of the Group’s performance. Considering the temporary closure of the malls, lower property operating & maintenance expenses of S$31.8 million were incurred in 1H2020. During the period, we note that property operating & maintenance expenses as a percentage of total gross revenue (hereon referred to as the percentage) was 34.5%, as shown in Exhibit 11. When the mall were fully opened in 1H2019 and 2H2019, property operating & maintenance expenses of about S$40 million were incurred in each half. This translated to a property operating & maintenance expenses percentage of 28.8% and 30.1% for 1H2019 and 2H2019 respectively.

Exhibit 11: Property operating & maintenance expenses as a % of total gross revenue

1H2019 2H2019 1H2020 S$ million S$ million S$ million Total gross revenue 134.2 138.8 92.3 Property operating & maintenance expenses 40.4 40.0 31.8 Percentage 30.1% 28.8% 34.5% Source: LMIR Trust, FPA Financial

For 2H2020, we would expect the property operating & maintenance expenses percentage to be slightly lower as operating efficiency is likely to improve. We would thus assume the property operating & maintenance expenses percentage in 2H2020 to be about 32%. Thus, the projected property operating & maintenance expenses for 2H2020 would be S$70.0 million = [0.32 x S$218.7 million in projected total gross revenue for 2020].

For 2021, we would expect the property operating & maintenance expenses percentage to adjust back to 2019 levels. We would thus assume the percentage to be the average of the two halves in 2020 at about 29%. Given this percentage, the projected property operating & maintenance expenses in 2021 would be S$73.1 million = [0.29 x S$252.1 million in projected total gross revenue for 2021].

For land rental, we would assume the expenses incurred in 2H2020 to be the same as 1H2020, bringing total land rental expenses for 2020 to about S$1.6 million. This is given the fixed cost nature of land rental expenses and relatively stable amount incurred annually (2018: S$1.6 million; 2019: S$1.7 million). We will further assume this amount of land rental expenses in 2021.

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Meanwhile, we note that property management fees tend to be variable costs that scale according to the Group’s revenue performance. We will thus adopt, as a proxy, the proportion of property management fees out of total gross revenue (hereon referred to as the proportion) to estimate property management fees for 2020 and 2021. We note that the proportion tends to average at about 3%, as shown in Exhibit 12.

Exhibit 12: Property management fees as a % of total gross revenue

1H2019 2H2019 1H2020 S$ million S$ million S$ million Total gross revenue 134.2 138.8 92.3 Property management fees 3.9 4.0 2.9 Proportion 2.9% 2.9% 3.1% Source: LMIR Trust, FPA Financial

Given the above, we will assume the proportion at 3% for both 2020 and 2021 in our projection. With projected total gross revenue of S$218.7 million for 2020 and S$252.1 million for 2021, the projected property management fee would be S$6.6 million and S$7.6 million respectively. For other property operating expenses, we note that this accounts for items such as the provision made for trade receivables. We note from LMIR Trust that as a small portion of tenants opted not to reopen, additional provisions were made should the malls be unable to collect past dues from such tenants. The higher provision made for trade receivables had resulted in higher other property operating expenses in 2Q2020. That being said, we will assume that other property operating expenses in 2H2020 to be the same as 1H2020 at S$4.3 million, given that we do not know how the provisions would be adjusted going forward. This would bring total other property operating expenses to S$8.6 million for 2020, which we would assume to be likewise for 2021.

Given the above, the projected total property operating expenses for 2020 and 2021 would be S$86.8 million and S$90.9 million respectively. Exhibit 13 below summarises the breakdown of the projected figures for total property operating expenses in 2020 and 2021.

Exhibit 13: Total property operating expenses projection

2020 forecast 2021 forecast Breakdown S$ million S$ million Land rental 1.6 1.6 Property management fees 6.6 7.6 Property operating & maintenance expenses 70.0 73.1 Other property operating expenses 8.6 8.6 Total property operating expenses 86.8 90.9 Source: FPA Financial

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Other gain/(losses) (net)

This component includes items such as gain or losses on hedging contracts and foreign exchange. We note that the Group consistently incurred about S$15 million in such losses in 2018 and 2019. We will thus assume an annual loss of S$15 million in account for 2020 and 2021. At the same time, we will also include the capital gains from the divestment of Pejaten Village & Binjai Supermall in this account for 2020. We note that the two properties were originally acquired at a total of Rp 985.5 billion. With the total divestment price totaling to Rp 1,152.6 billion, we would thus derive a capital gain on the properties’ sale of Rp 167.1 billion, or S$15.5 million based on a currency exchange rate of SGD 1 = Rp 10,808.92, assuming no other cost from the upgrading of the properties. Given the inclusion of the capital gain, we would project the balance in the other gains/losses account to be effectively zero in 2020.

Decrease in fair value of investment properties

As we had earlier noted on page 10, the divestment of Pejaten Village & Binjai Supermall was completed at revised sale consideration that was lower than the value noted in the divestment announcement on 30 December 2019. Based on LMIR Trust’s latest financial statements for 1H2020, this was recorded as a decrease in fair value of investment properties held for divestment which amounted to S$15.5 million. Deferred tax of S$1.3 million arising from the devaluation of the divestment assets had also been recognised accordingly. Meanwhile, we note that LMIR Trust had obtained new independent desktop valuations as at 31 July 2020 for all its properties. Excluding Pejaten Village & Binjai Supermall, the Group’s total portfolio valuation stood at S$1,474.8 million as at 31 July 2020, which is a 13.4%, or S$227.7 million decline from the value of S$1,702.5 million as at 31 December 2019. Exhibit 14 below summarises the details of the desktop valuations for LMIR Trust’s individual properties.

Exhibit 14: Desktop valuations of LMIR Trust’s properties

Market valuation (S$ million) S/N Name of property As at 31 Dec 2019 (1) As at 31 Jul 2020 (2) Change (%) 1 98.4 84.8 -13.8% 2 Palembang Square 71.5 64.1 -10.3% 3 Palembang Square Extension 28.5 25.3 -11.2% 4 Palembang Icon 74.8 66.6 -11.0% 5 Lippo Plaza Kramat Jati 64.0 53.2 -16.9% 6 Tamini Square 27.2 24.6 -9.6% 7 Cibubur Junction 31.0 24.3 -21.6% 8 79.0 63.9 -19.1% 9 Plaza Fair 99.8 87.9 -11.9% 10 Sun Plaza 219.1 191.7 -12.5% 11 Lippo Plaza Kendari 34.7 31.9 -8.1% 12 Lippo Plaza Ekalokasari Bogor 34.6 30.4 -12.1% 13 Lippo Plaza Batu 25.7 21.2 -17.5% 14 Lippo Plaza Jogja 56.4 50.9 -9.8% 15 Kediri Town Square 40.5 34.2 -15.6% 16 Indah Plaza 68.9 55.6 -19.3% 17 Istana Plaza 58.8 50.0 -15.0% 18 Lippo Mall Kemang 258.6 223.6 -13.5% 19 Lippo Mall Kuta 78.3 67.2 -14.2% 20 Gajah Mada Plaza 77.5 66.3 -14.5% 21 Mal Lippo Cikarang 72.9 65.3 -10.4% 22 Mall WTC Matahari Units 11.2 10.1 -9.8% 23 Java Supermall Units 13.5 12.1 -10.4% 24 Plaza Madiun Units 22.4 20.4 -8.9% 25 Depok Town Square Units 15.3 13.7 -10.5% 26 Malang Town Square Units 16.7 15.1 -9.6% 27 Metropolis Town Square Units 14.0 12.6 -10.0% 28 Grand Palladium Units 9.2 7.8 -15.2% Total portfolio 1,702.5 1,474.8 -13.4% (1) Conversion from IDR to SGD based on exchange rate of SGD 1 = IDR 10,320.74 (2) Conversion from IDR to SGD based on exchange rate of SGD 1 = IDR 10,657.14 Source: LMIR Trust, FPA Financial

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Typically, we note that LMIR Trust’s accounts for the changes in the fair value of its investment properties at the end of the year after a revaluation of its properties. Nonetheless, we will adopt the updated properties’ valuations as at the end of 31 July 2020 as a proxy for the revaluation that is expected to be made at the end of 2020. We would thus recognise a decrease in fair value of investment properties for 2020 based on the difference in the total valuation of the Group’s existing portfolio as at 31 July 2020 and 31 December 2019, which amounts to S$227.7 million. For 2021, we would assume no fair value adjustments.

For items such as interest income, financial expenses and administrative expenses, we will be assuming the figures for 2H2020 to remain the same from 1H2020. We will also then assume the figures for these items to remain the same for 2020 and 2021. For taxation, we would assume figures for 2H2020 to remain effectively similar to 1H2020. However, given stronger revenue performance for 2021, we would account for higher income tax by 10%, roughly aligned with the 10% increase in gross rental income.

Based on the above projections for the Group, we derive an after-tax net loss attributable to unitholders of S$209.4 million in 2020 and an after-tax net profit attributable to unitholders of S$44.9 million in 2021. Based on a weighted average number of issued units of 2,913.1 million, which we would assume to remain unchanged in 2020 and 2021, we project negative EPU of 7.19 cents in 2020 and EPU of 1.54 cents in 2021. We have summarised our earnings projections in Exhibit 15 below.

Exhibit 15: Earnings projection for 2020 and 2021

Full-year 2020 forecast Full-year 2021 forecast S$ million S$ million Total gross revenue 218.7 252.1 Total property operating expenses (86.8) (90.9) Net property income 131.9 161.2

Interest income 2.4 2.4 Financial expenses (47.8) (47.8) Total administrative expenses (11.2) (11.2) Other gain/(losses) (net) - (15.0) Total return/(loss) for the period before revaluation and tax 75.3 89.6

Decrease in fair value of investment properties held for divestment (15.5) - Decrease in fair value of investment properties (227.7) - Total return/(loss) for the period before tax (167.9) 89.6 Income tax (18.6) (20.5) Withholding tax (6.6) (6.6) Deferred tax 1.3 - Total return/(loss) for the period after tax (191.8) 62.5 Total return/(loss) for the period after tax attributable to: Unitholders (209.4) 44.9 Perpetual securities holders* 17.6 17.6 (191.8) 62.5

Weighted average no. of units in issue (million) 2,913.1 2,913.1 EPU (cents) (7.19) 1.54 Figures have been rounded *2H2020 figure assumed to be unchanged from 1H2020 figure of S$8.8 million. Figure for 2020 and 2021 are assumed to be the same. Source: FPA Financial

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DPU projection for 2020 and 2021

With our projected figures for after-tax net income in 2020 and 2021, we will now estimate the amount of distributable income to unitholders, and in turn DPU, for the respective years. To derive distributable income to unitholders, non-cash items such as depreciation and the decrease in fair value of investment properties are added back to after-tax net income. We will, however, consider the adjustments pertaining only some of the items, given that we do not have sufficient information to appropriately project the other items. After accounting for the adjustments, the projected amount available for distribution to unitholders would be S$35.9 million and S$44.9 million for 2020 and 2021 respectively, as shown in Exhibit 16. This translates to a DPU of 1.23 cents and 1.53 cents for 2020 and 2021 respectively, based on 2,926.8 million issued units.

Exhibit 16: DPU projection for 2020 and 2021 2020 forecast 2021 forecast S$ million S$ million Total return/(loss) for the period after tax (191.8) 62.5 Add/(less) non-cash items and other adjustments: Amount reserved for distribution to perpetual securities holders (17.6) (17.6) Decrease in fair value of investment properties held for divestment net of deferred tax 14.2 - Decrease in fair value of investment properties 227.7 - Total (loss)/income attributable to the period 32.5 44.9 Add back: retention sum from prior periods 3.4 - Amount available for distribution to unitholders 35.9 44.9 No. of units in issue 2,926.8 2,926.8 DPS (cents) 1.23 1.53 Figures have been rounded Source: LMIR Trust, FPA Financial

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VALUATION

We earlier noted on page 5 that the carrying values of the Group’s properties reflected in the latest balance sheet (as at 30 June 2020) are as at 31 December 2019. We also noted on page 18 that property revaluations were performed for the Group’s properties. We now perform a balance sheet adjustment to account for the revaluation of the properties, divestment of Pejaten Village & Binjai Supermall, and the acquisition of Lippo Mall Puri (assuming that it has already been acquired), given that the impact of these developments are not reflected in the Group’s latest balance sheet as at 30 June 2020.

Balance sheet adjustments

As earlier noted on page 10, we assume that net proceeds of about S$96.7 million following the divestment of Pejaten Village & Binjai Supermall, after deducting for the S$542,000 payable to LMIR Trust’s Manager, will be retained as cash. Adding this amount to the “cash & cash equivalents” balance of S$47.3 million as at 30 June 2020 would yield an adjusted “cash & cash equivalents” balance of S$144.0 million. Following the completed divestment of the two properties, the balance for “investment properties held for investment” would amount to zero. Given the adjustments, total current assets would amount to S$210.3 million. Meanwhile, considering the property revaluations on 31 July 2020 and the acquisition of Lippo Mall Puri, the “total investment properties” account would then reflect the sum of the updated total portfolio valuation of S$1,474.8 million and the value of Lippo Mall Puri at S$330.2 million, which would amount to S$1805.0 million. Given the adjustment, total non-current assets would amount to S$1,823.9 million, bringing total assets to S$2,034.2 million. Total liabilities would be higher at S$1,017.7 million to account for the S$120 million debt financing to acquire Lippo Mall Puri. This would imply an adjusted net asset value of S$1,016.5 million, and in turn, net assets attributable to unitholders of S$756.9 million. The resulting adjusted NAV per unit would then be 12.93 cents, based on 5,853.6 million issued units that would account for a 1-for-1 rights issue. The details of LMIR Trust’s balance sheet before and after the adjustments are summarised in Exhibit 17.

Exhibit 17: Adjusted balance sheet Before adjustment After adjustment S$ million S$ million Cash and cash equivalents 47.3 144.0 Trade and other receivables 51.6 51.6 Investment properties held for divestment 113.2 - Other assets 14.7 14.7 Total current assets 226.8 210.3

Investment properties 1,723.3 1,805.0 Investment in subsidiaries - - Intangible assets 4.6 4.6 Plant and equipment 9.7 9.7 Derivative financial instrument, non-current 4.6 4.6 Total non-current assets 1,742.2 1,823.9 Total assets 1,969.0 2,034.2 Total liabilities 897.7 1,017.7 Net assets 1,071.3 1,016.5 Represented by: Unitholders' funds 811.7 756.9 Perpetual securities 259.6 259.6 Net assets attributable to unitholders and perpetual securities holders 1,071.3 1,016.5 NAV per unit (cents) 27.73 12.93 Source: LMIR Trust, FPA Financial

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Based on the balance sheet adjustments, we note that the adjusted NAV per unit of 12.93 cents is lower than the reported NAV per unit of 27.73 cents as at 30 June 2020. We believe this is largely due to the dilutive effect of the rights issue as part of the S$280 million equity funding.

With a 1-for-1 rights issue, the potential issue price of each unit from the equity funding is estimated to be S$0.096 = [S$280.0 million / 2,926.8 million units]. The estimated potential ex-rights price would be S$0.105, as shown in Exhibit 18. This would be derived by adding the S$280.0 million equity funding from the rights issue to LMIR Trust’s current market capitalisation of S$333.7 million, and dividing the summed total of S$613.7 million by a new total of 5,853.6 million issued units = [2,926.8 million as at 30 June 2020 + 2,926.8 million from rights issue].

Exhibit 18: Computation of potential ex-rights price

S$ million Market capitalisation (8 Sep 2020) 333.7 Equity funding 280.0 Total value 613.7 No. of issued units (million) 5,853.6 Ex-rights price per unit (S$) 0.105 Source: FPA Financial

With the current concerns involving Moody’s potential downgrade of LMIR Trust’s rating and potentially weak financial performance in the near term, we believe there could be limited upside in share price, which may likely remain close to the ex-rights price of S$0.105 after the acquisition. This would imply a 7.9% downside from the current share price of S$0.114.

Given the above considerations, we are inclined to believe that the acquisition would have a negative impact on LMIR Trust’s share price.

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Peer comparison

We now perform an updated peer comparison analysis to account for the changes in the financial position of the peer companies. Exhibit 19 summarises the data for the updated peer comparison analysis.

Exhibit 19: Updated peer comparison

Share price (S$) Market capitalisation EPS (1) P/E NAV (2) P/B DPS (3) Dividend yield Company SGX ticker as at 8 Sep 20 (S$ million) (cents) (x) (S$) (x) (cents) (%) Lippo Malls Indonesia Retail Trust D5IU/LMRT.SI 0.114 333.66 (1.56) n/m 0.28 0.41 1.31 11.49 Peer companies: CapitaLand Mall Trust C38U/CMLT.SI 1.970 7,269.69 4.84 40.70 2.01 0.98 9.13 4.63 Frasers Centrepoint Trust (4) J69U/FCRT.SI 2.710 3,029.78 21.63 12.53 2.21 1.23 10.58 3.91 SPH REIT (5) SK6U/SPHR.SI 0.885 2,440.12 5.88 15.05 0.95 0.93 3.64 4.11 Average - - - - 22.76 - 1.05 - 4.22 Figures have been rounded n/m: not meaningful (1) Based on trailing diluted EPS over the last 4 quarters (2) As at 30.06.20, unless otherwise specified (3) Based on trailing DPS over the last 4 quarters (4) NAV as at 31.03.20 (5) NAV as at 29.02.20. Source: Respective company data, FPA Financial

Given the above results, we note that LMIR Trust’s dividend yield of 11.49% is higher than the peers’ average of 4.22%. While we note that LMIR Trust’s dividend yield is relatively attractive, we believe that the acquisition of Lippo Mall Puri is likely to reduce the value of the Group’s NAV per unit. We therefore reiterate our view that the acquisition of Lippo Mall Puri is likely to have a negative impact on LMIR Trust’s share price.

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INVESTMENT RECOMMENDATION

Following our initiation report issued on 3 January 2020, LMIR Trust’s share price dropped sharply in late February and had reached a low closing price of S$0.103 on 9 April 2020. The share price then rebounded and we note that it reached S$0.155 in mid-April and also in early June. However, in mid-June, the share price began to decline following a resurgence of COVID-19 cases in areas like Java and Jakarta. Nonetheless, the Group’s portfolio performance in terms of average occupancy has held up relatively well compared to the industry average, and visitor traffic has picked up since April. Still, the outlook for Indonesia’s retail sector remains uncertain due to the ongoing health concerns, and retail sales are likely to remain subdued in the near term.

Meanwhile, in terms of valuation, we derived an adjusted NAV per unit of 12.93 cents after factoring in the divestment of Pejaten Village & Binjai Supermall and the acquisition of Lippo Mall Puri. This adjusted NAV per unit is lower than the reported NAV per unit of 27.73 cents as at 30 June 2020. We believe that this is largely due to the dilutive effect of the rights issue as part of the equity financing for the acquisition. Based on a 1-for-1 rights issue, we estimated a potential ex-rights price of S$0.105. While we note that LMIR Trust’s dividend yield could remain attractive, we are inclined to believe that the acquisition of Lippo Mall Puri is likely to have a negative impact on LMIR Trust’s share price. Further, our financial projections indicate that the Group’s revenue and earnings performance could remain relatively weak in the coming months.

Given the above considerations, we have downgraded our recommendation from “buy” to “sell”. Our current recommendation largely reflects the concerns we have over the acquisition of Lippo Mall Puri, which we believe to be negative for LMIR Trust’s share price.

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DISCLOSURES/DISCLAIMERS

This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any recipient hereof. Advice should be sought from a financial adviser regarding the suitability of the investment product, taking into account the specific investment objectives, financial situation or particular needs of any person in receipt of the recommendation, before the person makes a commitment to purchase the investment product.

This report is confidential. This report may not be published, circulated, reproduced or distributed in whole or in part by any recipient of this report to any other person without the prior written consent of FPA Financial Corporation Pte Ltd (“FPA”). This report is not directed to or intended for distribution to or use by any person or any entity who is a citizen or resident of or located in any locality, state, country or any other jurisdiction as FPA may determine in its absolute discretion, where the distribution, publication, availability or use of this report would be contrary to applicable law or would subject FPA and its connected persons (as defined in the Financial Advisers Act, Chapter 110 of Singapore) to any registration, licensing or other requirements within such jurisdiction.

The information or views in the report (“Information”) has been obtained or derived from sources believed by FPA to be reliable. However, FPA makes no representation as to the accuracy or completeness of such sources or the Information and FPA accepts no liability whatsoever for any loss or damage arising from the use of or reliance on the Information. FPA and its connected persons may have issued other reports expressing views different from the Information and all views expressed in all reports of FPA and its connected persons are subject to change without notice. FPA reserves the right to act upon or use the Information at any time, including before its publication herein.

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