Daily Brief Indonesia: Lippo Karawaci and more

In our view, Lippo Karawaci’s (LPKR) 9M/22 results were mixed. The Real Estate Development segment was weak due to the challenging operating environment, with rising mortgage rates. The Healthcare and Lifestyle segments performed well, albeit this was not enough to fully offset the softness from Real Estate Development. Cash flows remained dismal. Leverage deteriorated and was elevated. Liquidity appears to be adequate, but is rapidly shrinking

LPKR’s near-term direction appears to be uncertain. While management seems confident that a rebound will occur in Q4/22 due to additional launches, the real estate sector in general is suffering from rising interest rates. Thus, it is unclear if take-up rates will be positive. Lifestyle is recovering from a very low base, due to the pandemic. Although Healthcare is the best performing segment, it was affected by a high base effect (due to abnormally high pandemic-related business in 2021).

We revise our Credit Bias to “Negative” from “Stable” due to the challenging macroeconomic conditions (with rising inflation and mortgage rates), which will continue to affect Real Estate Development.