Temasek Holdings lost its pants in Lippo Malls Indonesia Retail Trust?

Investing in Lippo Malls Indonesia Retail Trust is no fun. Since IPO, this counter has never reached the giddy height of IPO price. For those who bought at IPO and hold the units till now, the massive decline in unit price would have wiped out the returns from the total DPUs collected. In fact, the total DPUs issued so far was $0.398 but the decline was $0.56.

Nightmare of Lippo Malls Indonesia Retail Trust

Lippo Malls Indonesia Retail Trust in dark chapter

Given the massive decline in unit price of Lippo Malls Indonesia Retail Trust, long-term investors would have lost their pants investing in this counter. Not to mention the opportunity cost if they had cut losses earlier. Then again, retail investors should take heart that even big boys like Temasek Holdings also make mistakes in their investment thesis.

Lippo Malls Indonesia Retail rust

The DPU of Lippo Malls Indonesia Retail Trust had fallen so much since IPO. And for good reason too. The number of issued units had surged from 1.065 billion to  staggering 2.89 billion. To rub salt into injury, the unit price has also fallen to an abysmal level since IPO. The question now is: given the state of play, is it safe to enter this counter now?

Temasek Holdings walloped by Lippo Malls Indonesia Retail Trust

The problem with Lippo Malls Indonesia Retail Trust is not its business model. In fact, when the REIT got listed in 2007, Temasek Holdings was a major shareholder, owning 12.8% in this REIT mainly through Mapletree  Investments Pte Ltd(Lippo Malls Indonesia Retail Trust used to be known as Lippo-Mapletree Indonesia Retail Trust). For Singapore investment arm to make an investment, there must be compelling value proposition from Lippo Malls Indonesia Retail Trust right?

However, for some unknown reasons, Temasek Holdings sold its stake in 2011.

Perhaps, Temasek Holdings must have a first-hand taste of how volatile Lippo Malls Indonesia Retail Trust can be because the unit price plunged to a crazy low of $0.15 at the peak of the Great Financial Crisis in 2009. The REIT recovered swiftly in subsequent months but nowhere near the IPO price. Temasek Holdings must have lost patience and exited its investment in Lippo Malls Indonesia Retail Trust.

On 19 May 2011, Temasek Holdings entered into a Sales and Purchase Agreement with Lippo Karawaci to sell its 9.02% stake in Lippo Malls Indonesia Retail Trust for $0.56 per unit.

According to the IPO prospectus of Lippo Malls Indonesia Retail Trust, Temasek Holdings was a cornerstone investor and the units were issued at a 12.1% discount to the net asset value of $0.91. So effectively, Temasek Holdings should have entered at about $0.80 per unit. Thus, selling at $0.56 per unit would mean a negative return of $0.24 per unit (excluding the DPUs). Even if the DPUs issued between 2008 and 2011 were factored in, it is unlikely that Temasek Holdings had breakeven its investment in Lippo Malls Indonesia Retail Trust.

Since the exit of Temasek Holdings, this REIT had endured a number of lost years which culminated in the unit price hitting a low of $0.18 in end of 2018.

Lost decade

On looking back, Temasek Holdings had the foresight to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: July 9, 2019 — 1:20 pm

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