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

Good afternoon, everyone. Please welcome equity investors, regulators and credit rating agencies to PT Lippo Karawaci Tbk First Half 2025 Earnings Call. Today, as a moderator, I'm Randi as the Head of Investor Relations. With me today, we have Pak Fendi Santoso as the Group CFO. Today, we will present our first half 2025 results followed by question and answer. [Operator Instructions] Without further ado, please Pak Fendi to continue with the presentations. Thank you. Hand over to you, Pak Fendi.

Thank you, Randi. Good afternoon, everyone. Thank you for joining our earnings call that we will talk about the first half of the results of Lippo Karawaci Tbk. So let me just go straight to the highlights for the first half of the year. I think in spite of the soft economy and the buying power of the Indonesian consumer that's come down for quite a bit this year. We continue to see that our business to be quite resilient, especially on our real estate and health care, where some of our lifestyle segments, especially hotel has faced a bit of headwinds, which I'll talk about a little bit later. On the real estate segment, our marketing sales hit IDR 2.5 trillion, achieving 40% of our full year target, which is IDR 6.25 trillion. Revenue grew by about 51% to IDR 3.5 trillion, and this is driven by a lot of handovers that we've done across our Lippo Karawaci projects, in particular, Park Serpong as well as one in Lippo Cikarang, EBITDA remained stable at about IDR 526 billion. Lifestyle overall stable. Revenue hit at about IDR 659 billion with EBITDA increased by 41% to IDR 213 billion. Malls relatively doing well. We are seeing our visitor has come up and occupancy rate has improved year-on-year. Hotel, as I mentioned to you, quite -- facing quite headwinds, and this is despite room hotels grew by about 10% and occupancy strengthened quarter-on-quarter. But we've faced headwinds. I think this is a challenge that all the hotel industry are facing with the government budget cut that is introduced by government starting earlier this year. Health care continued to be quite resilient with revenue increased modestly by about 1.5% and EBITDA by IDR 1.3 trillion. Now in terms of the P&L, we've booked a revenue of IDR 4.1 trillion, and this is compared to IDR 8 trillion last year, but obviously, there were some effect there that we didn't enjoy the consolidation of Siloam that we enjoyed in the first half of the last year. So if we remove that Siloam deconsolidation, we will be looking at about IDR 3 trillion of revenue in the first half of the year. So that's a 35% increase for the first half 2025, EBITDA on a pro forma basis, IDR 722 billion, and on the first half of the year, we've registered IDR 627 billion of EBITDA, down by 13%, and this is driven because of the margin compression that we experienced in our real estate development business. Overall, this is the P&L. We've talked about revenue and EBITDA. Our underlying NPAT for the first half of 2025 is IDR 208 billion, increased by 36% compared to last year, IDR 153 billion, and this is driven by improvements in net interest expenses on the financing costs, where we've reduced by about 3/4 of our cost compared to last year and also an improvement in income from associates because of the improvements in Lamai contributions as well as because Siloam is now being deconsolidated and being counted as part of the associate income. NPAT, IDR 138 billion bottom line for the year. Obviously, this is much lower than last year because last year, we've enjoyed a lot of one-off gain from the sale of the Siloam as well as the impact on the deconsolidation of Siloam, which give us about IDR 19.7 trillion of profits in the first half of 2024. Liquidity remained pretty strong. We closed our first half with IDR 6.5 trillion of cash balance. We've seen a lot of improvements from the net interest expenses, where last year, we've spent about IDR 645 billion, now it's only IDR 174 billion, so significant reductions on the financing costs. We've also managed to secure refinancing of our previous syndicated loans with the new BTN loan facility with improvement in the cost of funding. Now we were getting about BI 7D RR plus 1.4% to 1.75% margins, which is about 60 basis points improvement from our previous syndicated loans. So that will continue to improve our financing costs moving forward. Balance sheet strengthened now since earlier this year, we've managed to retire all our U.S. dollar-denominated debt. Now we are fully 100% rupiah loans. So it's a complete match between our revenue and cost. With also the refinancing that we did with BTN, we also improved our maturity profile, previously, it was up to 2028, now we've pushed it back to 2032, so that will improve our cash requirement for debt servicing, so will ease up our cash requirements for the immediate terms for debt servicing ratio. So let's move on to the business highlights for each segment. So real estate, in the first half of 2025, we've sold 19 projects of landed residentials, about 9 low to high-rise projects and then 16 projects of shophouses. We've talked about the marketing sales performance and the majority of this marketing sales still be concentrated in the landed housing by 67.7%. We've made about 9 launches for the first 6 months of the year, 3 launches in Lippo Karawaci, 3 in Cikarang and 3 in Tanjung Bunga in Makassar, now just on -- a bit more detail to the marketing sales that we've done in the first half of the year, IDR 2.472 trillion compared to the full year target of IDR 6.25 trillion, as I mentioned earlier, 40% achievements. Majority of the marketing sales came from Lippo Karawaci residentials, followed by Lippo Cikarang. We've managed to get a land plot of IDR 41 billion for the first half of the year. This is close to what we've targeted for the full year, and in terms of land bank, we still have very ample land bank that we can develop with an estimated total gross development value of IDR 155 trillion. Just a breakdown of the marketing sales, Lippo Karawaci still dominated by landed housing, 77% of total marketing sales that we did in Lippo Karawaci. Lippo Cikarang is a bit more balanced, 47% landed housing and 40% commercial. In terms of the payment mode, we're still dominated by mortgage, which account about 63% of our marketing sales. And the majority of our marketing sales still dominated by the affordable housing product, which is a product that is below IDR 1 billion per unit, which still account for about 67% of the marketing sales that we've made in the first half of the year. This is just to give you some highlights about the project of -- the handover units that we've done for the first half of the year. A lot of them are coming from Park Serpong, Cendana Cityzen Park and Cendana Cityzen Park North, also some of the units that we've built in Lippo Village and Lippo Cikarang, and this is just to give you some picture to the product innovations that we've done within Lippo Karawaci, the premium homes that we've recently developed, the Belmont Homes and the Bentley homes. These are the two products that we've introduced in Lippo Village, which actually done pretty well. The marketing sales for the year is actually a lot better than what we've projected for these two products. The Allegra products is the premium product that we've launched in Lippo Cikarang. This is actually one of the -- we haven't really launched a premium product in Lippo Cikarang for quite some time, and this is the first time we've done so for Lippo Cikarang, and we were very encouraged to see that the demand for these products in Lippo Cikarang still remains robust. We are getting a lot of -- very good marketing sales for these products beyond what we've initially expected. Now also Blackslate, we've introduced this in Tanjung Bunga and tractions are pretty positive in Makassar. We've also introduced some of the new innovations on the affordable homes, particularly this Treetop Livin, which is a 3 stories landed house that we're going to launch in Park Serpong. The launch will be conducted in, I think, the next 3, 2 weeks. This is 3 stories on a 40 square meter land and about 75 square meters building area priced at about IDR 629 million. So that's on the property home developments. On Lippo malls, just to recap, we've managed about 59 malls nationwide in 39 cities across Indonesia with a net leasable area of about 2.5 million square meters, very well diversified tenant mix, and then this is in terms of our mall portfolio compared to our competition and then just some of the names of the tenants that is occupying our malls. Now in terms of the performance revenue, our mall revenue actually grew by about 9% with EBITDA up by 11%. Margins remained pretty stable at 25%. Now our mall visitors also grew by about 10% year-on-year compared to last year, and occupancy continued to be strong and increased by about 5% compared to last year. This is just to give you some activities that we've done in our malls. We've signed up with DUST in 2 of our malls, Malang Town Square and Plaza Medan Fair and also Samsung in a few of our malls, some of the picture that the team has taken from the event. We've also done an event with the Government of Jakarta on Jakarta's 498 anniversary with the opening of the ceremony done in our malls, Mall Nusantara and which was attended by the government himself -- the governor himself. This is also the signature event that we've always done annually back to schools. This is done in June with a few of our activities across our malls. Now on the hotel, as I mentioned to you, we've managed about 10 hotels across 9 cities with 2 leisure premises, the golf club and also country clubs. In terms of revenues down by 5% and EBITDA down by 22%, and this is predominantly driven by a lot of our hotel guests been enjoying a lot of events from the ministry and also state-owned enterprises has been facing a decline because of the government spending cuts that was introduced earlier this year. Now that being said, on a positive note, we have started to see the performance coming back in July as the Minister of Finance actually opened up partially the budget spending of the government starting -- starting June and July. So that made positive contributions to the hotel industry, and we are seeing that also in our hotel business. On the health care segment, the revenue modestly grew by 1.5% to IDR 4.7 trillion, where EBITDA was recorded IDR 1.3 trillion, 21% increase. However, there are one-off nonoperational that we've enjoyed last year. If we remove that, our underlying EBITDA would be minus 5.8% year-on-year with net profit of IDR 476 million, up by 10%, again, because we've enjoyed a one-off benefit out of the noncash write-offs that we've had last year in our health care business. Overall, the outpatient has increased from 2.069 million to 2.86 million. But however, we are seeing conversions actually coming down from 3% to 2.9%, slightly coming down. And this is impacted into our inpatient admissions down by 7.7% and also our AlOS actually come down by about 6.9% resulting in occupancy rates coming down by 6.2%. Now on the positive note side, even though the inpatients coming down, we are seeing our ARPOB average revenue per occupied bed actually increased by 8% year-on-year at IDR 1.78 million. And our revenue per patient days also increased by about 3% to IDR 6.8 million, and this is still relatively higher than our competition as we benchmark with them. That's all from Lippo Karawaci. And looking ahead, we will continue to -- we continue to deliver and innovate on our home development business with the both premiums as well as affordable housing. We are still aiming for delivering our full year target of IDR 6.25 trillion on our lifestyle business. We are hopeful that the hotel -- the recovery of hotel business continued to happen in the first half of the year, and we continue to see that the mall performance improving in the second half of the year. And also with our health care business, with the advancing of the Next Gen Siloam strategies, we believe that Siloam is well positioned to capitalize the potential growth of the health care business in Indonesia. I'll pause there just to see if there's any questions from everyone. I'll pass it back to Randi for the Q&A session. Thank you.

Actually, we have a couple of questions in the Q&A box Pak Fendi, you may maybe answer.

I cannot see the Q&A session though, hold on, let me just -- oh, yes, yes I see that, yes, okay.

Maybe from Brian first maybe Pak Fendi.

Yes. I think obviously, BI has just reduced the BI rate to 5% and obviously, this will impact positively to the home -- the sale -- the marketing sales for our housing business. So we are anticipating that marketing sales, we are hopeful that marketing sales will improve in the second half of the year, and thus, we are optimistic that we're able to deliver our full year target of IDR 6.25 trillion by December.

So maybe let's maybe move on into the last question because it's also related with the presales. We achieved 40%, will the guideline will be revised?

Yes. So we are still aiming for our guidance of IDR 6.25 trillion marketing sales. We will have a few new launches for the remaining years in I think the new cities too. So we are looking forward to see that coming into play in the second half of the year. So yes, we're still guiding for IDR 6.25 trillion of marketing sales for the year.

Maybe next question we cover from Ravi Manwani about the SILO buyback. Maybe any further divestment from us Pak Fendi?

I just wanted to ask about SILO actually, there's reports of buyback of Lippo Group divestment stake. I mean this is divestment stake from SILO. So we don't have any plan to divest or buy back SILO shares today. I think from the -- that's from the Lippo Karawaci standpoint, but the buyback plan for SILO -- share buyback from SILO, I don't see any plan, at least I don't know of such plans, but this is probably the question that you can designate to the SILO team.

Maybe about the margins of the apartments.