Lippo Village, Tangerang, Indonesia
Monday, 5 November 2018.
PT Lippo Karawaci Tbk (“LPKR”), Indonesia's largest and most dynamic property development platform, having successfully completed the first phase of its IDR 6 trillion asset divestment plan, is well positioned from a cash flow and balance sheet perspective as it embarks on its next stage of growth. The company regrets the decision of Fitch to lower LPKR’s rating from B to CCC+ and believes that the decision was unsubstantiated.
The Company wishes to highlight a number of key developments over the past two weeks:
• Liquidity/Cash Flow.
While we acknowledge Fitch's concerns around liquidity expressed in May this year, LPKR has successfully delivered on its asset divestment plan with the completion of the sale of First Reit Manager and a partial sale of its First REIT shares generating IDR 2.2 Trillion in proceeds. Together with the upcoming sale of Lippo Mall Puri into our own Lippo Mall REIT, the divestment of our remaining stake in First Reit, and our stake in Hospital in Myanmar, the Company will raise way in excess of IDR 6 Trillion in net cash. These asset divestment projects are in advanced stages of completion, and while execution risks remain, we believe the quality of assets make completion a high certainty even amidst current volatility. LPKR would be well positioned to meet its liquidity needs, and capitalize on compelling opportunities unique to current market volatility.
• Balance Sheet.
We note our strong balance sheet position and comfortable debt maturity profile. Our next maturity is USD 75 million unsecured bonds due in June 2020, followed by USD 410 million in 2022, and the remaining USD 425 million in 2026. All this equates to approx Rp 14 Trillion in Debt versus Rp 53 Trillion in Assets at acquisition value, and perhaps 20-30% higher if revalued to reflect current market prices.
• Business Model & Strong Execution.
But more critical than the strength of liquidity and balance sheet is that LPKR remains to be the most dynamic and leading property development platform in Indonesia. LPKR has developed major enterprises with leading market shares in the following sectors:
Pushing for the next breakthrough.
The above reflects LPKR unique track record in building businesses and its ability to conceptualize, innovate, execute, and monetize opportunities. This has and will continue to be the hallmark of LPKR.
The see the next breakthrough opportunity in Meikarta, and through the knowhow acquired, for LPKR to be the largest home builder in Indonesia during a golden decade where Indonesian home ownership will skyrocket from current single digits to ~35%. This will transform the scale and dynamism of LPKR from being a company that generates USD 0.5-1 billion development sales, to one that generates USD 3-7 billion annually. Key to this is LPKR's unrivaled design and cost structure allowing us to sell at a price point that will allow for mega scale and volume, and through this, see massive value creation from the commercial and supporting ecosystem. Home ownership in Indonesia is going through what China went through over the past 15 years, with the government support through projects such as "Project Sejuta Rumah" (One Million Homes Initiative). We see this by far as the single largest opportunity in the Indonesian property sector.
For the above reasons, we regrets Fitch's decision to lower LPKR’s rating from B to CCC+. This decision is unsubstantiated by the liquidity, balance sheet, credit quality nor business model of LPKR. LPKR remains to be Indonesia's leading and most dynamic property development platform.
A side note on alleged bribery investigations.
While we are saddened by the recent news related to the bribery allegations of the Bekasi city government, we will continue to be fully supportive of the law enforcement’s process, and are pleased that on Thursday, 1 November 2018, Corruption Eradication Commission (KPK) Deputy Chairman Alexander Marwata stated that the Lippo Group has not been implicated in the case: "The parent [group] has no business in this case", commented Alexander, instead turning to the broader challenge of difficulty in obtaining permits. For this reason, the KPK will focus on improving aspects of the bureaucracy in the region, particularly in Bekasi district, Alexander added. "The paradigm is far different now. The President himself has ordered the process of obtaining permits to be made easier, not more complicated," he said, referring to President Joko "Jokowi" Widodo's ambition of Indonesia joining the top 40 nations in the World Bank's annual Ease of Doing Business ranking by 2019.
About Lippo Karawaci (“LPKR”) (www.lippokarawaci.co.id)
LPKR is Indonesia's largest listed property company by total assets and revenues, anchored by a large land bank and solid recurring income base. LPKR's businesses comprise Residential/Townships, Retail Malls, Hospitals, Hotels and Asset Management. LPKR develops residential, light industrial, commercial, retail properties throughout Indonesia. LPKR through its subsidiaries manage and operate hospitals, malls and hotels in major cities in Indonesia and also provides a broad range of infrastructure services to the residents of our developments, and other property management and REIT management services.
Through our two main publicly listed subsidiaries, PT Lippo Cikarang, Tbk (“LPCK”) and PT Gowa Makassar Tourism Development Tbk (“GMTD”), of which LPKR owns 54.4% and 62.7% respectively, LPKR develops and currently operates urban developments at Lippo Cikarang in Bekasi and at Tanjung Bunga in Makassar. In addition, LPKR owns 51.05% of PT Siloam International Hospitals Tbk (“SILO”), the largest private hospitals network in Indonesia, which currently manages and operates 34 state-of-the-art-hospitals in 25 cities throughout the country, comprising 12 hospitals in Greater Jakarta and 22 hospitals distributed across Java, Sumatra, Kalimantan, Sulawesi, Bali and Nusa Tenggara supported by more than 2,700 specialists and general practitioners as well as over 10,000 nurses and support staff.
LPKR has established and sponsored two public listed REIT in Singapore, namely First Real Estate Investment Trust (“First REIT”) and Lippo Malls Indonesia Retail Trust (“LMIR Trust”). LPKR is listed on the Indonesian Stock Exchange with market capitalization of IDR 6.7 trillion or USD 440 million as at October 30, 2018.
For more information please contact:
William Wijaya Utama
Danang Kemayan Jati
Vice President, Head of Corporate Communication
This press release has been prepared by PT Lippo Karawaci Tbk (“LPKR”) and is circulated for the purpose of general information only. It is not intended for any specific person or purpose and does not constitute a recommendation regarding the securities of LPKR. No warranty (expressed or implied) is made to the accuracy or completeness of the information. All opinions and estimations included in this release constitute our judgment as of this date and are subject to change without prior notice. LPKR disclaims any responsibility or liability whatsoever arising which may be brought against or suffered by any person as a result of reliance upon the whole or any part of the contents of this press release and neither LPKR nor any of its affiliated companies and their respective employees and agents accepts liability for any errors, omissions, negligent or 3 otherwise, in this press release and any inaccuracy herein or omission here from which might otherwise arise.
Forward-Looking Statements. Certain statements in this release are or may be forward- looking statements. These statements typically contain words such as "will", "expects" and "anticipates" and words of similar import. By their nature, forward looking statements involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this release. Factors that could cause actual results to differ include, but are not limited to, economic, social and political conditions in Indonesia; the state of the property industry in Indonesia; prevailing market conditions; increases in regulatory burdens in Indonesia, including environmental regulations and compliance costs; fluctuations in foreign currency exchange rates; interest rate trends, cost of capital and capital availability; the anticipated demand and selling prices for our developments and related capital expenditures and investments; the cost of construction; availability of real estate property; competition from other companies and venues; shifts in customer demands; changes in operation expenses, including employee wages, benefits and training, governmental and public policy changes; our ability to be and remain competitive; our financial condition, business strategy as well as the plans and objectives of our management for future operations; generation of future receivables; and environmental compliance and remediation. Should one or more of these uncertainties or risks, among others, materialize, actual results may vary materially from those estimated, anticipated or projected. Specifically, but without limitation, capital costs could increase, projects could be delayed and anticipated improvements in production, capacity or performance might not be fully realized. Although we believe that the expectations of our management as reflected by such forward-looking statements are reasonable based on information currently available to us, no assurances can be given that such expectations will prove to have been correct. You should not unduly rely on such statements. In any event, these statements speak only as of the date hereof, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.