Many people don’t seem to be happy with LippoMalls as it seems that dividends per unit dropped from $0.79 to $0.73. As a follow up post to LippoMalls Goes On An Acquisition Spree In October 2012, we will examine if there is any cause for concern with this drop in DPU.

Firstly, Q3 2012 Gross Revenue is $30,553 which is lower than Q3 2011 Gross Revenue of $33,296. However, this is actually due to several reasons.

1 – Gross revenue in Q3 2011 includes service charge and utilities recovery from mall’s operational activities. However, these operational activities are outsourced to a third party starting from May 1 2012. The operating company is responsible for all costs directly related to the maintenance and operation of the individual retail malls, as well as pay for the rental of office and use of equipment. The operating company also has the right to collect a service charge and statutory income from the tenants.

2 – Effect of foreign exchange rates

3- The gross revenue also includes revenue from the two newly acquired Pluit Village and Plaza Medan Fair to offset part of the losses

Despite all the adjustments, net property income is up 31.3% from $22.5 mil in Q3 2011 to $29.5 mil in Q3 2012.

The most important change though comes from the 186% increase in financial expenses from $2.06 mil to $5.9 mil  due to the issuing costs of the medium term notes. This is however just a one time impact which will see more revenue in future due to the new properties to be acquired.

Now the important thing is for the management to be able to increase occupancy rates in the new malls and manage them well. So the drop in DPU is not really alarming, but we will have to watch the management closely to see if they can deliver.


For more information, you may be interested in:

LippoMalls Goes On An Acquisition Spree In October 2012

Results Release of LippoMalls REIT FY2011 – Disappointing Performance or Not?

LippoMall Rights Going At Big Discount

My Singapore Stock Portfolio Early September 2012

Understanding Singapore REITs Part One – REIT Categories