China International Capital Corporation has lowered its forecast for Link Real Estate Investment Trust's 2025 distribution per unit (DPU) by 4% to HKD 2.57 per unit.
According to a research report released by China International Capital Corporation, it has lowered the target price for Link Real Estate Investment Trust (00823) by 15% to HKD 40, reflecting the adjustment of profit forecasts and a more cautious long-term outlook. Due to the continuous weakness of the retail industry in Hong Kong, the forecast for Link's 2025 DPU has been adjusted downward by 4% to HKD 2.57, and the forecast for 2026 DPU has been introduced, with a year-on-year flat growth rate. The rating remains "outperform the industry".
The report states that Link's performance for the fiscal year ending in March 2024 was in line with market expectations. Income and net property income (NPI) grew by 11% and 9.5%, respectively, mainly due to the contribution of newly acquired properties. Due to the 4.3% and 5.4% decreases in DPU and the fair value of the property portfolio's net asset value (NAV), respectively, the retail property sector is expected to slightly recover, while the office property sector continues to be under pressure, with a rental adjustment rate of 2.8% for the whole year, a decrease of 10.2%. Furthermore, the group's investment property portfolio value decreased by 0.6% year-on-year, but the group's balance sheet remained healthy, with a 1.7 percentage point increase in debt-to-asset ratio to 19.5%. China International Capital Corporation will continue to monitor the recovery of Hong Kong's retail industry and believes that supermarkets will face long-term challenges. It recommends paying attention to changes in consumer trends and their impact on profits.
In addition, the group's investment real estate portfolio value decreased by 0.6% year-on-year, but the group's balance sheet remained healthy, with a debt ratio rising by 1.7 percentage points to 19.5%. China International Capital Corporation will continue to observe the recovery of the retail trade in Hong Kong, believing that supermarkets will face long-term challenges and recommending attention to the impact of changes in consumer trends on profits.