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Financial Results


2018 FULL YEAR UNAUDITED FINANCIAL STATEMENTS AND DISTRIBUTION ANNOUNCEMENT

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Profit & Loss

Balance Sheet

Review of Performance

4Q 2018 vs 4Q 2017

Gross rental income is S$3.9 million lower than 4Q 2017, mainly due to weakening of Indonesian Rupiah against Singapore Dollar as compared to 4Q 2017, and lower rental income for retail spaces due to the expiry of the master leases over the 7 Retail Spaces. The impact from weakening of Indonesian Rupiah and expiry of the master leases over the 7 Retail Spaces is partly offset by additional rental income due to acquisition of Lippo Plaza Kendari in June 2017, Lippo Plaza Jogja and Kediri Town Square in December 2017 respectively.

Other revenue is S$18.3 million higher than 4Q 2017, mainly due to collection of service charge and utilities recovery charges directly from tenants of the malls and Retail Spaces, while as in 4Q 2017, it was outsourced to a service provider.

Property operating expenses are S$20.9 million higher than 4Q 2017, mainly due to costs incurred of S$20.9 million (4Q 2017: Nil) for maintenance and operations of the malls and Retail Spaces.

Finance expenses are S$1.7 million higher than 4Q 2017 mainly due to additional borrowings for acquisition of Lippo Plaza Jogja and Kediri Town Square in December 2017. The effect is partially offset by partial repayment of Bond and term loan due in November and December 2018 respectively by using internal cash resources.

Administrative expenses are S$1.4 million lower than 4Q 2017 mainly due to lower management fees as a result of lower value of deposited property and net property income as well as reversal of over accrued expenses.

Income tax expense is S$0.5 million higher than 4Q 2017 mainly due to the new tax regulations in Indonesia which came into effect on 2 January 2018. Refer to item 1 (a) (i) Statement of Total Return on page 3 and 4 of the results announcement for details on the new tax regulations.

Other losses (net) comprise realised and unrealised foreign exchange gains/(losses) and realised and unrealised hedging contracts gains/(losses). It also includes amortisation of intangible assets in relation to PICON, Kuta, Kendari and Jogja.

The Trust has foreign currency options contracts to mitigate its exposure on currency movement as the majority of the Trust's income is in Indonesian Rupiah. The unrealised gain/ loss on foreign currency options contracts is a non-cash item and does not affect the amount of distribution to unitholders.

YTD 2018 vs YTD 2017

Gross rental income is S$9.0 million lower than YTD 2017, mainly due to weakening of Indonesian Rupiah against Singapore Dollar by 9.5% as compared to YTD 2017, and lower rental income for retail spaces due to the expiry of the master leases over the 7 Retail Spaces. The impact from weakening of Indonesian Rupiah and expiry of the master leases over the 7 Retail Spaces is partly offset by additional rental income due to acquisition of Lippo Plaza Kendari in June 2017, Lippo Plaza Jogja and Kediri Town Square in December 2017 respectively.

Other revenue is S$41.9 million higher than YTD 2017, mainly due to collection of service charge and utilities recovery charges directly from tenants of the malls and Retail Spaces.

Property operating expenses are S$52.2 million higher than YTD 2017, mainly due to:

i) costs incurred of S$45.3 million (YTD 2017: Nil) for maintenance and operations of the malls and the Retail Spaces; and
ii) net allowance for doubtful debts made in YTD 2018 of S$4.8 million (as opposed to a net reversal of allowance for doubtful debts made in YTD 2017 of S$2.0 million).

Finance expenses are S$3.1 million higher than YTD 2017, mainly due to additional borrowings for acquisition of Lippo Plaza Jogja and Kediri Town Square in December 2017. The effect is partially offset by partial repayment of Bond and term loan due in November and December 2018 respectively by using internal cash resources.

Administrative expenses are S$2.5 million lower than YTD 2017 mainly due to lower management fees as a result of lower value of deposited property and net property income as well as reversal of over accrued expenses.

Income tax expense is S$7.1 million higher than YTD 2017 mainly due to the new tax regulations in Indonesia which came into effect on 2 January 2018. Refer to item 1 (a) (i) Statement of Total Return on page 3 and 4 of the results announcement for details on the new tax regulations.

Other losses (net) comprise realised and unrealised foreign exchange gains/(losses) and realised and unrealised hedging contracts gains/(losses). It also includes amortisation of intangble assets in relation to Lippo Plaza Batu, PICON, Kuta, Kendari and Jogja.

Distribution to perpetual securitities holders is S$3.7 million higher than YTD 2017, due to issuance of S$120 million of perpetual securities at a distribution rate of 6.6% per annum in June 2017.

The Trust has foreign currency options contracts to mitigate its exposure on currency movement as the majority of the Trust's income is in Indonesian Rupiah. The unrealised gain/ loss on foreign currency options contracts is a non-cash item and does not affect the amount of distribution to unitholders.

Commentary

Since the beginning of 2019, the Indonesian Rupiah has strengthened 2.2% to Rp10,345 against the Singapore Dollar on the back of improvements in the Indonesian economic indicators, which has been perceived favourably by investors compared to its other emerging market peers. Indonesia's economy expanded at a faster year-onyear ("y-o-y") pace in 2018, with gross domestic product growth at 5.17% as compared with growth of 5.07% in 2017. Indonesia's growth forecast for 2019 has been set at 5.30% , on expectations of a stronger spending push planned for 2019, as announced by President Joko Widodo. The Rupiah's appreciation was also accompanied by a build-up in foreign exchange reserves which has been consistently improving since September 2018.

In 2018, price levels in Indonesia were muted with a decrease in annual inflation rate to 3.13% , from 3.61% in 2017, and this was also at a level below the 3.50% target set in the national budget. Inflationary pressures were mainly moderated by the government's decision to cap the prices of subsidised commodities such as fuel and electricity throughout the year, while the main inflationary pressure originated from the price increase of raw food. In a bid to defend the depreciating Rupiah, Bank Indonesia has raised its interest rate a total of 175 basis points in 2018 to its current level of 6.0%.

Stronger retail sales were reported in November 2018 with growth in the Real Sales Index (RSI) accelerating to 3.40% y-o-y from 2.95% y-o-y in October 2018. This was mainly driven by growth in sale of clothing, automotive fuels as well as cultural and recreational goods. With the Christmas and New Year holiday season, retail sales are expected to surge in December 2018, pushing up both retail sales in 4Q 2018 as well as for the entire year.


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