BOCOM International (1.6,0.02,1.27%) raised the target price of Guanjun (02778) by 9.38%, from HK$6.4 to HK$7, and continued its “buy” review.

The bank believes the company will benefit from a shortage of supply in core business districts and be able to maintain sustainable net property income. Based on the company's better-than-expected operating performance and rent growth, the bank's revenue and net property income forecasts for 2019 and 2020 increased by 8.6%, 9.2%, 7.9%, and 8.6%, respectively.

Also, although the company has a debt of HK$3.7 billion due this year, the market's expectations for interest rate hikes have declined.

The bank said that the company's 2018 performance was better than expected, mainly driven by the performance of Garden Road Property No. 3. The occupancy rate of Garden Road 3 reached 99.1%, and the monthly rent per foot rose 6.6% to HK$98.61 per foot, mainly due to increased demand from Chinese investment expansion and commercial building reconstruction in the same area. 8.2% of the company's leases have expired this year, and another 22.4% lease has been adjusted. The rent level is HK$65-70 per foot. The bank believes there is room for further increases in rents, as the new rent in December 2018 was higher than HK$140 per foot.

Also, Langham Place Mall's retail revenue increased 17.6% year over year in 2018, higher than the market's 8.8% year-on-year increase. Net property income increased 10.5% year over year, and property division rent increased 60% year over year.