PT Lippo Karawaci Tbk has 5.2 Trillion Rupiah or $500 million SGD in cash left after their issued rights, last reported 9 month to 2019.
How about Siloam Hospital? Net profit has jumped back up with 50% increase in operating cash flow (OCF) to $357 Billion Rupiah. Capex is at 4 year low with low debt. Things is looking good. However cash flow use for investing is more than OCF.
First Reit revenue from Siloam Hospital is 82.2% which is $95.5 million SGD or $985 billion rupiah. It was said that Karawaci is paying for Siloam's rental, total $698 billion rupiah. Karawaci can easily paid up. That mean Silaom have to cough out $287 billion rupiah.
Siloam operating expenses jumped from $1354 billion to $1630 billion rupiah in FY 2018, probably due to rupiah depreciation effect as well. For 9 month 2019, the expense increase more than 15%. No rental info can be found. $287 billion rupiah is less than 20% of the expenses.
Kawawaci paid $510+32 (One property added in FY2019) billion rupiah for 9 month 2019 for Siloam's rental. There was 1 more property added. Signs that the sponsor won't throw the rental to Siloam, they have the cash anyway.
In my opinion, I think the lease renewal will remain status quo.
1. It is disadvantage to cause another up roar by drastically reduce the rental.
2. If I want to make a drastic change, I would opt to do in 5 years later for 44% of the portfolio rather than now for 22%.
3. The affected properties rental stands for $170 billion rupiah or $16.5 million SGD. lets half this rental revenue and that is a lost of $8.25 million SGD. That is 1 cents drop in DPU in terms of SGD.
4. Let's say they throw it to Siloam to pay up, $170 billion Rupiah won't be a big impact on Siloam.
Conclusion
Market is in fear for small impact. At least for the next 5 years.Of course there is also the concern of asset injection via rights.
Reference:
Karawaci
https://www.lippokarawaci.co.id/investor-center/financial-statements
Siloam
https://www.siloamhospitals.com/Contents/Investor-Relations/Publication/Annual-Reports
Thanks for the write-up on First Reit and sharing your invaluable insights. I am still holding on to a significant portion of my portfolio in First REIT. Hopefully Victor can negotiate a good deal for First REIT with his Indonesian counterparts.
ReplyDeleteThank you for the write-up. It keeps me on my toes. I have 10% of my portfolio on First REIT. I am holding to this portfolio since my buy-in valuation is low, and welcome the good dividends. Regards.
ReplyDeleteHi, thank you for your insights. I would like to add a point. I would be very surprised that if OUE did not reach a mutual understanding with LIppo Karawaci regarding the future rent negotiation when the former purchased 17.6% First Reit shares from the latter. A massive drop in future rent will make First Reit’s price so weak for a long period of time that the injection of OUE assets will become very difficult. Make sense ?
ReplyDeleteyes. that is why any major alteration to a 22% renewal will proof to be more disadvantage for the sponsors. it will make more sense to delay later for larger renewal and at a better position. who know maybe sponsor make a fortune from their development and there will be no need of any changes by then.
DeleteAnyway the original dynamic has been changed. The straight commercial rationale for Lippo Karawaci to continue to subsidise heavily for Siloam Hospitals is weaker now. But I guess that James Riady and Stephen Riady can talk to avoid actual economic conflict of interests. Just my guess. Regards.
ReplyDeleteHi, I looked deeper into the data. I think the affected rental in 2021 expiry is NOT ONLY SGD 16.5 million. It should be above 30 million. The pie chart only reflects the shares in GFA, not the rentals. There are 4 hospitals and one hotel having their leases expired in 2021. I could not find the rental for the one expiring in 8/21. For the 3 hospitals expiring in 12/21, the rentals are 26.3 million in total. The hotel contributed 3.95 million in 2018. Thus, the total must exceed 30 million as per end of 2018. The impact is double. The market has a reason to be worried.
ReplyDeleteMind sharing your info? mine is from Lippo Karawaci annual report/ 2019 3Q finical report.
Deleteit is base on each hospital rental expenses.
Hi, I found the rental for Sarang Hospital in Korea, expiring 8/2021. It should be around SGD 1.6 million (apparently a small hospital ). Thus the total rental impacted should be around SGD 31.6 million as per end of 2018. In terms of percentage of gross revenue, it should be around 27.2%. Best Regards
ReplyDeleteI don't think it is under Siloam . So it does not need Lippo Karawaci rental support.
Deleteagree.
Deletemy source of info is from Philip securities report dated 7/10/2019. Best regards.
ReplyDeleteLink please?
DeleteAnnual report should has the most accurate number
https://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/FIRT20191008.pdf
ReplyDelete1. They highlighted the wrong hospitals
Delete2. total revenue for the expiring Indonesia hospital is about 26 Million SGD base on the pdf
3. Which mean Lippo Karawaci is not paying in full rent of those hospitals and Siloam paid the rest.
4. if rent drop is 16 Million SGD, DPU will drop 2c. Are you ok with that?
5. I am more concern of any acquisitions and the sponsors
6. Sponsor seem to be selling its stake for cash, may not be a bad thing. Just that mean they need cash and rather than anyhow dump asset for cash.
2 cents drop is a bit painful but marginally ok. I have just bought some at $1 already for the next dividend. Best Regards
ReplyDelete