Daiwa first Hong Fu Industrial Trust (0808.HK) is better than the market rating, with a target price of HK $2.10.

The bank said that the Hongfu Industrial Trust has a low rent level and a high possibility of rent increase, which is based on the view that tenants are usually relocated to non-central areas and that new supply in Kowloon is limited in the coming years. Daiwa believes that the increase in office rents in the core areas and Kowloon East will be good for the rental business prospects of Hongfu Industrial Trust, and it is expected that the current rent of HK $14.70 per square foot will gradually rise as of June 30.

The bank estimates that the rise in property values has brought Hongfu Industrial Trust close to the level at which it can borrow to finance new acquisitions. The bank said that based on its forecast, the dividend yield of Hongfu Industrial Trust in fiscal 2012 could reach 6.7%, with an attractive valuation.

Hongfu Industrial Trust closed 0.5% higher at HK $1.88 on Tuesday.