Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

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Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Credit

Lippo Malls Indonesia Retail Trust / Credit

Lippo Malls Indonesia Retail Trust (LMRT SP)

Since our 28-May initiation report ( <a href="https://www.smartkarma.com/insights/lippo-malls-indonesia-retail-trust-no-malls-no-mercy" target="_blank" data-smartkarma-citation="insights:39835" rel="noopener">Lippo Malls Indonesia Retail Trust: No Malls, No Mercy</a> ) on <a href="https://www.smartkarma.com/entities/lippo-malls-indonesia-retail-trust" target="_blank" data-smartkarma-citation="entities:10946:1" rel="noopener">Lippo Malls Indonesia Retail Trust (LMRT SP)</a> (LMIRT)’s two perpetual bonds (LMRTSP 6.6% and 7% Perpetual (in SGD)) and LMRTSP 7.25% 6/24 (in USD)) with an Underweight recommendation, the perpetuals underperformed while the senior bonds outperformed.
LMRTSP 6/24 outperformance is not justified and we believe headline risk on potential rating downgrades, cashflow uncertainties, and the use of LMIRT to sustain its sponsor ( <a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> (Lippo)) by buying its assets during the pandemic leaves us more questions than answers on whether LMIRT is for investors or the sponsor. That said, we reiterate our UNDERWEIGHT recommendation on the LMRTSP complex.  
LMIRT’s operating earnings were worse than expected as a result of the COVID-19 pandemic. Our liquidity calculation leads us to believe LMIRT does not have sufficient cash to call its LMRTSP 7% Perp next September. Even without the call on the perp, the trust’s decision to acquire new assets from Lippo, especially with financing and rights from Lippo, further constrains LMIRT’s financial flexibility.

Since our 28-May initiation report ( Lippo Malls Indonesia Retail Trust: No Malls, No Mercy ) on Lippo Malls Indonesia Retail Trust (LMRT SP) (LMIRT)’s two perpetual bonds (LMRTSP 6.6% and 7% Perpetual (in SGD)) and LMRTSP 7.25% 6/24 (in USD)) with an Underweight recommendation, the perpetuals underperformed while the senior bonds outperformed.
LMRTSP 6/24 outperformance is not justified and we believe headline risk on potential rating downgrades, cashflow uncertainties, and the use of LMIRT to sustain its sponsor ( Lippo Karawaci (LPKR IJ) (Lippo)) by buying its assets during the pandemic leaves us more questions than answers on whether LMIRT is for investors or the sponsor. That said, we reiterate our UNDERWEIGHT recommendation on the LMRTSP complex.  
LMIRT’s operating earnings were worse than expected as a result of the COVID-19 pandemic. Our liquidity calculation leads us to believe LMIRT does not have sufficient cash to call its LMRTSP 7% Perp next September. Even without the call on the perp, the trust’s decision to acquire new assets from Lippo, especially with financing and rights from Lippo, further constrains LMIRT’s financial flexibility. 

Lippo Malls Indonesia Retail Trust: Sponsoring the Sponsor