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Lippo Group's retail, health care business growing, property sluggish
In a high interest rate environment and with the coronavirus pandemic nearing the endemic stage, analysts see growth potential in many of Lippo Group's business lines but difficulties in the property segment.
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Lippo Group's health care subsidiary, Siloam Hospitals, is predicted to produce a positive result as demand for health care services is increasing among Indonesia’s growing population.
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font size="3">Despite having subsidiaries in the sectors of retail, hospitality, health care, education, finance, media and technology, Lippo Group is mostly associated with its property business that was established in the early 1990s.
However, with the property sector facing a downturn due to high interest rates and the Meikarta project creating negative sentiment, analysts see other businesses in the conglomerate’s portfolio play a greater role in the group’s future performance.
Owned by the Riady family, Lippo Group includes several publicly listed companies operating mainly in the property sector, such as Lippo Karawaci, Lippo Cikarang and Gowa Makassar Tourism Development (Tanjung Bunga). Their stocks gained popularity with prices hitting all-time highs between 2013 and 2015, but they have gone down since then.
According to the latest financial report of Lippo Karawaci, where all Lippo Group's property units are consolidated, the conglomerate's real estate business posted Rp 2.79 trillion in revenue at the end of the third quarter last year, marking a 21.8 percent year-on-year (yoy) decline.
Earnings before interest, taxes, depreciation and amortization (EBITDA) of its property business decreased at an even faster rate, falling 47.7 percent yoy to Rp 418 billion over the same period.
To push up sales this year, the conglomerate has announced plans to sell more landed residential houses and launch new apartment projects.
Jono Syafei, equity research analyst at Henan Putihrai Sekuritas, attributed the drop in Lippo Group's property revenue to the general decline in the industry following the pandemic and Bank Indonesia (BI) interest rate hikes.
