Lippo Malls Indonesia Retail Trust (SGX:D5IU) And The Real Estate Industry Prospect For 2018

Lippo Malls Indonesia Retail Trust (SGX:D5IU), a S$912.39m small-cap, operates in the real estate industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios as an asset class. Real estate investment trust, or a REIT, is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Singapore stock market as a whole. Should your portfolio be overweight in the real estate sector at the moment? In this article, I’ll take you through the real estate sector growth expectations, as well as evaluate whether Lippo Malls Indonesia Retail Trust is lagging or leading its competitors in the industry.

View our latest analysis for Lippo Malls Indonesia Retail Trust

What’s the catalyst for Lippo Malls Indonesia Retail Trust's sector growth?

Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw growth in the twenties, beating the Singapore market growth of 8.00%. Lippo Malls Indonesia Retail Trust leads the pack with its impressive earnings growth of 40.53% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Lippo Malls Indonesia Retail Trust poised to deliver a 16.72% growth over the next couple of years compared to the industry's -14.05%. This growth is a median of profitable companies of 19 REITs companies in SG including Mapletree North Asia Commercial Trust, OUE Commercial Real Estate Investment Trust and Frasers Hospitality Trust. This growth may make Lippo Malls Indonesia Retail Trust a more expensive stock relative to its peers.

Is Lippo Malls Indonesia Retail Trust and the sector relatively cheap?

The REIT industry is trading at a PE ratio of 15.18x, in-line with the Singapore stock market PE of 13.04x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 6.00% on equities compared to the market’s 7.45%. On the stock-level, Lippo Malls Indonesia Retail Trust is trading at a PE ratio of 20.1x, which is relatively in-line with the average REIT stock. In terms of returns, Lippo Malls Indonesia Retail Trust generated 5.42% in the past year, in-line with its industry average.

Next Steps:

Lippo Malls Indonesia Retail Trust’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Lippo Malls Indonesia Retail Trust has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Lippo Malls Indonesia Retail Trust's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has D5IU's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lippo Malls Indonesia Retail Trust? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.