OFFICIAL-TEXT-S&P summary: PT Lippo Karawaci Tbk.

(Agency corrects the company name to Lippo Malls Indonesia Retail Trust from Lippo

Mapletree Retail Trust which was wrongly stated in the previous version published on 12

September 2012.)

(The following statement was released by the rating agency)

Sept 12 -

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Summary analysis -- PT Lippo Karawaci Tbk. ------------------------ 12-Sep-2012

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CREDIT RATING: BB-/Stable/-- Country: Indonesia

Primary SIC: Real estate

agents and

managers

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Credit Rating History:

Local currency Foreign currency

28-Feb-2012 BB-/-- BB-/--

23-Nov-2010 B+/-- B+/--

26-May-2009 B/-- B/--

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Rationale

The rating on Indonesia-based property developer PT Lippo Karawaci Tbk. (Lippo

Karawaci) reflects the company's aggressive capital expenditure plans and

exposure to volatile cash flows from the cyclical property development

business. The company's dominant position in the domestic property market and

its strong financial flexibility in terms of good access to equity and capital

markets temper the above weaknesses. The rating also reflects our assessment

that Lippo Karawaci has a "fair" business risk profile and an "aggressive"

financial risk profile, as our criteria define the terms.

We view Lippo Karawaci's aggressive expansion appetite as a rating weakness.

Higher capital expenditure could result in more borrowings than what we

assumed in our base-case scenario. The company's good financial flexibility

tempers this weakness. Lippo Karawaci has the flexibility to sell assets to

fund expansion.

We expect Lippo Karawaci's strong operating performance to continue in the

next 12 to 24 months. Demand for the company's properties and healthcare

services has been robust and occupancy at its hotels and shopping malls has

increased due to strong economic growth in Indonesia. Although borrowings have

increased by US$150 million as of June 30, 2012, from about US$650 million a

year earlier, the company's profitability has also improved in the first half

of 2012 compared with a year earlier. Both factors have contributed to a ratio

of lease-adjusted debt to EBITDA of about 4.2x, which is consistent with the

rating. This ratio has improved from an average of 4.7x in 2009-2011.

Lippo Karawaci's healthcare services generate more stable cash flows than

property development, albeit at lower margins. We expect the prospects for

healthcare to be positive due to the shortage of good-quality healthcare

services and the rising affluence in Indonesia.

Lippo Karawaci's recurring income from leasing properties, property

management, and dividends from its investment in First REIT and Lippo Malls Indonesia Retail

Trust (not rated) also provide stability to its cash

flows. We expect dividends from REITs to contribute about 12% of the company's

consolidated EBITDA in the next one to two years.

We believe the good market position, long record, and satisfactory

profitability of Lippo Karawaci's property development and healthcare

businesses underpins the rating. EBITDA margins on property development are

25%-27%, while those for the non-property development businesses are 20%-23%.

In our base-case scenario, we expect Lippo Karawaci's consolidated revenue to

increase to about Indonesian rupiah (IDR) 5.0 trillion-IDR5.5 trillion in 2012

from about IDR4.1 trillion in 2011. We anticipate EBITDA to go up to IDR1.2

trillion from IDR1 trillion. With the completion of more hospitals in the next

one to two years, we expect EBITDA from the healthcare segment to grow by

about 30% to IDR140 billion in 2012 compared with 2010. We expect the ratio of

lease-adjusted debt to EBITDA to improve to less than 4.2x and the ratio of

debt to capitalization to remain less than 45% by the end of 2012. For the 12

months ended June 30, 2012, the lease-adjusted debt-to-EBITDA ratio was 4.2x

and the debt-to-capitalization ratio was 37.8%.

Liquidity

Lippo Karawaci's liquidity is "adequate," as defined under our criteria. The

company has a long maturity profile with the bulk of its borrowings comprising

senior unsecured notes due in 2015. Near-term refinancing needs are limited.

In addition, in May 2012, the company raised US$150 million in notes due 2019.

Capital expenditure is the main use of liquidity and the company has some

flexibility to adjust this spending. In our base-case scenario, we expect the

company's sources of liquidity to exceed its uses by at least 1.2x over the

next 12 months. Our liquidity assumptions are based on the following factors

and assumptions:

-- Funds from operations will be IDR700 billion-IDR800 billion in 2012.

-- Cash and cash equivalent are IDR6.1 trillion as of June 30, 2012.

-- Committed capital expenditure and working capital needs for the next

12 months are about IDR2 trillion.

Lippo Karawaci has good headroom in its financial covenants. As of June 30,

2012, the company complied with the covenants in its bank loan agreements of a

minimum interest cover of 1x and debt-to-equity ratio of less than 2.7x. We

expect Lippo Karawaci to maintain a comfortable cushion in the covenants in

the next 12 to 18 months using our base-case assumptions. In the unlikely

event that EBITDA declines by 20%, we expect the company will continue to

comply with the covenants.

Outlook

The stable outlook reflects our expectation that Lippo Karawaci's strong

growth from its property development and healthcare businesses, stable

profitability, and good financial flexibility will translate to a financial

performance over the next 12 months that is appropriate for a 'BB-' rating.

We could lower the rating if Lippo Karawaci's expansion is more aggressive

than we expected and is debt funded. We could also downgrade the company if

its revenues and profitability deteriorate. This could occur if a significant

slowdown in Indonesia's economy or a sharp increase in interest rates reduces

the demand for properties and healthcare services. We consider a

lease-adjusted debt-to-EBITDA ratio of more than 4.5x to be a downgrade

trigger.

Potential upside to the rating is limited. However, we could upgrade Lippo

Karawaci if: (1) the company expands its business scale and diversity; and (2)

it improves the income contributions from stable and less cyclical businesses

such as healthcare, property leasing, and property management.

Source: http://news.yahoo.com/official-text-p-summary-pt-lippo-karawaci-tbk-145128497--sector.html

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