PT Lippo Karawaci Tbk (LPKR) Earnings Call Transcript & Summary

Hello, good afternoon, everyone. Please welcome equity investors, bond investors, regulators and credit rating agency to PT Lippo Karawaci Tbk Full Year 2024 Earnings Call. Today as a moderator, I'm Randi as the Head of Investor Relations. And with me today, we have Mr. Fendi Santoso as the Group CFO. Today, we will present our full year 2024 results, followed by question and answer. [Operator Instructions] Without further ado, please Pak Fendi to continue with the presentation. Thank you.

Good afternoon, everyone. Thank you for joining our earnings call today. We will talk about the full year results of Lippo Karawaci. So let's just go dive in on the business performance highlights for 2024. In general, we have a good year. All our business segments have demonstrated a consistent performance improvement year-on-year. On the real estate side, our marketing sales reached IDR 6 trillion. This is a 12% higher than what we targeted earlier this year -- earlier last year. And this is obviously supported by a very strong handover and then strong executions by the team. Our revenue on the Real Estate side is IDR 5.05 trillion, grew by about 15% year-on-year and EBITDA IDR 1.1 trillion. On the Healthcare side, our revenue in Siloam was IDR 12.2 trillion, with underlying EBITDA of IDR 2.76 trillion and underlying NPAT of IDR 1.26 trillion, reflecting a strong operational performance. On the operating metrics, we will talk about a little bit deeper later. We've seen all our key metrics improved. On the Lifestyle segment, our revenue is positive -- revenue on the mall grew by about 2% to IDR 682 billion, and our hotel business is 11% increase year-on-year to IDR 497 billion. This is on the back of, obviously, a somewhat [indiscernible] a very challenging macro backdrop last year, but we are seeing consumer activity recovered. So, this shows that the revenue and EBITDA for the group for LK. On a pro forma basis, just so that we are able to compare for like-to-like, our revenue grew by -- from IDR 6.8 trillion to IDR 18.5 trillion. It is 11% growth, and all the growth contributing by all our business segments, 15% from the Real Estate, 9% Healthcare and 3% Lifestyle, whereas on EBITDA level grew by 6% from IDR 4.05 trillion to IDR 4.3 trillion. Now given that the transactions that we did last year around June, where we sell partially our stake in Siloam, we had to deconsolidate Siloam from our P&L and that happened -- started in July 2024. Thus, there's the impact of the deconsolidation from Siloam, which bring down our statutory revenue to IDR 11.5 trillion and EBITDA to IDR 2.5 trillion. Now the contributions from Siloam, post the deconsolidation is going to come into income from associates. Now, Siloam will be recognized as an associate company within Lippo Karawaci. Thus, with all the operational expenses control that we're focusing on, in particular on the interest expenses, where we've managed to reduce down our net interest expenses by 26% on the back of the liability management that we've been executing over the last few years. We've managed to recorded an underlying NPAT of IDR 402 billion for the full-year 2024. This is a big improvement compared to a loss of IDR 68 billion from last year. Our bottom line was at IDR 18.7 trillion. This is driven by the one-off gain that we enjoyed because of the deconsolidation of Siloam, as well as the gain from the partial exits of Siloam. And this is an improvement from a IDR 50 billion profit that we booked in 2023. Our cash position continued to be healthy and strengthened. We've increased our cash holding from the beginning of the year IDR 2.65 trillion to IDR 5.3 trillion. Our operating cash flow continued to be strong at IDR 1.7 trillion. Our investing cash flow improved to a net cash inflow of IDR 9.4 trillion. This is on the back of the divestments that we've done in Siloam. And as such, we are able to use the majority of the operating cash flow and the investing activity cash flow to pay down our debt. And as such, we still have about IDR 5.3 trillion and our balance sheet continued to be strengthened. This is the debt profile of Lippo Karawaci. Our balance sheet continue to be strengthened. The debt breakdown for the year-end of 2024, we still have about 16% of the U.S. dollar-denominated debt, which is amounting to about IDR 1 trillion. This actually has been paid off in January 2025 at maturity. And as such, as of today, all our debt are in rupiah. Thus, we've managed to eliminate the FX risk within our company. And the historical net debt also dropped pretty substantially to IDR 1.1 trillion and net gearing ratio comes down quite significantly also from 0.59x to 0.04x in 2024. So let me dive in into each business segment. We start -- we will start with our Real Estate business. And this is actually a slide that give you a picture to the scale and the breadth of projects that we've done within Lippo Karawaci. In 2024 alone, we sold 111 projects of landed residentials, 5 projects of low-rise residentials, 1 project mid-rise, 22 projects high-rise and 25 project shophouses. We've talked about the marketing sales, IDR 6 trillion that we've achieved in 2024. There are -- there were 4 launches that we've done in 2024, 4 of which were done in Lippo Karawaci, Park Serpong Phase 2, X-PANA, Cendana Suites and Colony at Diponegoro and Park Serpong Phase 3, which we did in October, November last year. Lippo Cikarang, we've done 3 launches last year; QXYZ Livin Series, The Hive at Neo Patio and Spark South and Cendana Suites at The Patio and Tanjung Bunga in Makassar, which we did 1 launches, XYZ Livin Series and Cendana Suites. I think financial performance, we've talked about this on the previous slides. I think we remain to be innovative. Moving forward, targeting and focusing on first-time homebuyers and focusing on affordable housing within the development area that we've had today. This is just to show the progression of marketing sales achievements over the last few years. We've continued to grow our marketing sales to IDR 6 trillion. This is the breakdown by projects. And in terms of land banks, we have about 1,000 hectare of land bank, which, if we are assuming at current marketing sales run rate, we would still have about 25 years to cultivate our existing land bank. Thus, I think the pressure to add more land bank is not there. This is a breakdown of the marketing sales by products. 80% of our sales in -- marketing sales in Lippo Karawaci is still dominated by landed housing, whereas in Lippo Cikarang, only 48% landed housing and then commercial contributes about 20% and industrial 27%. In terms of the payment method, 69% of the payments were being made by mortgages. Thus, it actually imply that our products are being purchased by the end user, which is the segment that we are targeting. And then 70% of the homes sold were priced at IDR 1 billion, which indicates the strategy that we are doing on the affordable housing. This is the handover that we've done in 2024. On Park Serpong, Cendana Cityzen Park, we've started to handover some of the units. Towards the end of last year, 83 units has been delivered. I think by today, we've done slightly over 500 units. So, that's pretty exciting because we are able to deliver this ahead of our schedule. On the Lippo Village development, most of them are almost completed by last year, 95% in Cendana Cove. Cendana Icon, we've done 99% handover; Cendana Essence, 70%; Cendana Cove Verdant, 87%; 99% Cendana Marq. Brava Himalaya, we've finally handover the last units last year. So, that's 100% completed in handover. In Lippo Cikarang, 88% for Waterfront and Tanamera, 62%. And this is just to give you an idea of the new product development that we've -- that the team has done in Park Serpong, Cendana Suites and Blackslate, which is slightly more premium products ranging from IDR 1 billion to IDR 1.1 billion, 78 to 88 square meter size of building for Cendana Suites. And for -- Blackslate is IDR 1.9 billion price point, 125 square meter landed house. XYZ and Q Livin, which is more affordable, priced at around -- starting from IDR 380 million to IDR 731 million. For Q Livin, around IDR 500 million to IDR 600 million with a size of about 40 to 55 square meter. This is just to give you the launches -- photo of the launches that we've done last quarter. In the fourth quarter, we did the Park Serpong Phase 3. We call it 9en Collection. We launched it in 19 October, 94% take-up rate. Lippo Cikarang Cosmopolis, we've launched this in 9 November 2024, the take-up rate 91%. And Makassar, we've done in Tanjung Bunga, 30th November, with 88% take-up rate. This is just photos that we took just to show you the progress that we made in Park Serpong Phase 1. We are very excited with this project. It's started to come -- starting to look pretty exciting townships. We've started to handover in November. We're able to deliver this project in less than 18 months, the period that we promised to our customers. And the feedback from the customers is also pretty positive. So, we are very excited to continue this -- finishing up this project and handing over the units to our customers this year. So that's Healthcare. Moving on to Healthcare -- no, that's Real Estate. Now moving on to Healthcare. Siloam booked a revenue of IDR 9.45 trillion. It's a 9.1% growth from last year, with underlying EBITDA of IDR 2.76 trillion, up by 3.2% compared to last year with an EBITDA margin of 29.2%. Underlying net profit, IDR 1.26 trillion and operating cash flow of IDR 2.33 trillion. We are seeing all our operating metrics improve pretty healthily. The outpatient visits improved by 7.5% for the full year, 7.8% growth in inpatient admissions. Inpatient days and also average length of stays also improved 7.2%, with occupancy rates increased from 65.2% to 66.6%. We are also seeing growth in all payers group, whether it's private payers, which is up by 10.5%. Corporate insurance, despite all the challenges within the insurance business with a high claim ratio, it still delivered a 22% growth and -- over the last 5 years and also BPJS continued to register growth too. The OpEx slightly notched in this year, and this is because of the transformation plan that we've embarked in Siloam with the new generation Siloam transformation. But overall, the underlying EBITDA still posted a growth to IDR 2,757 billion. Obviously, margin has contracted because of the cost investments that the team made in Siloam. We continue to commit for growth. As of 2024, we have about 4,133 operational beds, and we'll aim to increase this by 1,124 in -- over the next 3 years to 5,257, with this pipeline of extensions and expansions of new hospitals in Indonesia. Moving on to the third segment, the Lifestyle. Lippo Mall, currently, we manage about 59 malls nationwide across 39 cities encompassing over 2.5 million square meters of net leasable area with a very well-diversified tenant mix. And we are seeing progress or improvements continued in our mall business. Malls revenue recorded at about IDR 682 billion, up 2% from last year, with EBITDA IDR 162 billion, up by 2%. We have continued to see mall visitors going up by 5% compared to last year and also occupancy rates continue to improve, now stands at about 81.2%. We have also proudly -- recently did a soft launch in Lippo Mall Nusantara. It was previously known as Plaza Semanggi. This is a mall that is strategically located in the heart of Jakarta, just right by the junctions of the famous Semanggi. It is going to be one of our flagship mall. We've still -- renovation is still ongoing. We will complete this hopefully, before the Independence Day. And we're going to launch this at the same day as our Independence Day on the 17th of August. So if any of you that lives in Jakarta, I would encourage you to visit this mall because we've done -- I think the team has done a pretty good job in terms of renovating this and basically revamp the whole concept of the mall in Lippo Mall Nusantara. This is just a sample of events that we've done in 2024. Lifestyle events that we believe able to drive visitors to our malls in Lippo Mall Puri, the Hello Kitty Run that are able to attract 10,000 more participants on that particular day. Plaza Medan Fair, they've done -- they did this Indonesian Idol 13 pre-auditions. Senayan Park, we are doing an Emina Eureka Fest. And also, we did a collaboration with Bank Mandiri in launching our Mandiri Lippo Malls credit card. On the hotel business, we are currently managing 9 hotels across Indonesia, 1,900-plus rooms, and we also operate a club -- a country club and golf course in Karawaci. Also, the performance has been good for 2024. Revenue recorded at IDR 497 billion, up by 11%. EBITDA, IDR 198 billion, up by 11%. Occupancy rate remains healthy at 69%, and we've managed to improve our room rate by about 7% year-on-year. And this is one of the area that, Aryaduta, our hotel business manages a beach club in Park Serpong, which resides in our real estate development in Park Serpong. So, I guess that's it. I think looking ahead, moving forward, we will continue with our strategy in the Real Estate business. Our target for marketing sales for 2025 is IDR 6.25 trillion, which is up by 4% compared to last year and 16% increase from the target that we've set in 2024. The focus is going to be still affordable housing and mass market products. On the Healthcare business, we continue to deliver clinical excellence in the CONGO specialties. We are -- the teams are looking to continue to execute the Next Gen Siloam initiative with different archetypes that they have crafted and also an increase in new operational bed by about 1,124 over the next 3 years. And our Lifestyle segment, our malls, we continue to strengthen our occupancies, doing a lot of lifestyle events, revamping and investing in renovations on our key malls. And also on our hotel business, we are continuing to see that this business continue to present a potential growing demand and something that we are looking to invest further. I think that's all from us. And should we go straight to Q&A, Randi?

Yes. We can go straight to the Q&A, Pak Fendi.

Right. Let me just go through, Siloam has raised loans to acquire the hospital assets from First REIT. When do you expect these transactions to be completed? And what will be the benefit to LPKR? I guess -- I think the process has been kicked off within Siloam. I think in terms of funding, they already have funding secured for this particular transaction. I think for further details, I would suggest that you ask this information from the management of Siloam. But I think this will benefit a lot for Healthcare, not only that it will strengthen the operational performance of Siloam as we're still holding about 29% of stake in Siloam, but it will also remove rental support that Healthcare has been committed to Siloam to First REIT. I think that's all from -- there's questions regarding Lippo Malls SGD perps. I think this is something that we could probably ask LMIRT directly in terms of the plan that they have on this.

Any more questions from the participant, please drop on the Q&A box?

Okay. Are there any plans for dividends? We are still discussing this. But I think that in terms of dividend for this year, we may need to finalize this. I don't think it will be likely for us to pay dividend this year. But this is something that we've been discussing internally, and we'll update everyone once we've finalized our thinking. In terms of revenue guidance, I think it will be pretty similar to this year. I think we are looking at about close to 10% revenue growth, and we'll continue to focus on profitability for 2025 similar to what we've accomplished in 2024. Do you see any room to raise price point for affordable home offering? Yes. Actually, if you're looking back to Park Serpong Phase 1, we've actually started our price point at slightly below IDR 300 million per unit. Now it started at IDR 380 million. So, we continue to optimize and deliver a product and price point that we believe would attract demand from the consumers. So yes, we will continue to see that price point continue to increase. But at the same time, we don't want to lose that tractions from our customers, and we continue to be innovative and play around with the right price point that we wanted our customers to enjoy. Any plan to increase stake in LMIRT? We don't have any plan yet. What does the company think about the U.S. dollar market? Will you keep that in your capital structure? Today, we wanted -- because there are so many uncertainties in the market, so we wanted to remove anything that would present us with risk at this particular time. And as such, we've eliminated all our U.S. dollar-denominated liabilities within our balance sheet just so that we would be able to naturally match our revenue against our costs. But obviously, not in short term, probably in the long term, we'll continue to monitor, see whether we could -- if the market recovers and we are seeing things becoming more predictable and stable, then obviously, bond market, in particular, U.S. dollar bonds would be an area that we could take advantage of. I think -- Siloam margins, I think something that you would be able to ask Siloam, but I think we'll continue to remain stable, if not improved moving forward. Do you have any plan to redeem the rest of 2026 U.S. dollar bonds? We actually -- there's actually a small stuff leaving there, but I think there is not much to be honest. We've paid the big chunk of the 2025 bonds in January. I think that's all, Randi, here.

That's all. Okay. I think that's all. Thank you, everyone. Thank you, Pak Fendi, for the presentation and the Q&A. And then thank you also for the participants attending Lippo Karawaci Full-Year 2024 Earnings Call. We will share the material after this call, and then see you again on the first quarter 2025 earnings call. Have a good day. Thank you very much.

Thank you, everyone. Have a good day. Take care. All right. Thanks, Randi. Thanks, Vivian.