Lippo Malls Indonesia Retail Trust faces hit from new tax: OCBC

Indonesian rupiah notesIndonesian rupiah notes

OCBC put its Hold rating and target price for Lippo Malls Indonesia Retail Trust (LMIRT) under review after Indonesia passed new tax regulations for income from land and building leases.

That income will be subject to a 10 percent tax on the amount collected, including service and utility coverage charges, it said.

“We believe the news will prompt selling pressure on the counter,” OCBC said.

It noted the REIT manager calculated that if the new regulations had come into effect on January 1, 2017, instead of the beginning of this year, that the 2017 dividend per unit (DPU) would have been 7.2 percent lower at 3.19 Singapore cents, pro forma, instead of the actual 3.44 Singapore cents. That pro forma DPU would have been a historical dividend yield of 8.4 percent on Wednesday’s close of S$0.38, it said.

The unit ended down 3.95 percent at S$0.365 on Thursday.