We estimate that if interest rates rise by 0.5%, interest expense is equivalent to an increase of 3.6% in 2016 pre-tax profit (excluding investment property revaluation)-Guanjun Industrial Trust ("Guanjun") announced its annual results for 2016, and its distributable income increased by 16.2% to 1.408 billion yuan. Each fund unit was allocated 0.2295 yuan, an annual increase of 15.7 percent. According to the closing price of 4.46 yuan at the end of last year, the annual distribution rate is 5.15%. The United States has entered the interest rate hike cycle, and the Federal Reserve is expected to raise interest rates two or three times this year. If Hong Kong follows the pace of interest rate increases in the United States, it is expected to put pressure on the interest expenses of the champion. In response to the rise in interest rates, management has increased the proportion of fixed rate loans in outstanding loans to 25% of total loans in June last year, but the remaining 75%, or 10.9 billion yuan, is floating rate loans, which will be affected by changes in interest rates. We estimate that if interest rates rise by 0.5%, interest expenses will increase by 54.5 million yuan, equivalent to 3.6% of the 2016 pre-tax profit (excluding the revaluation of investment property). If Guanjun's future income is flat but interest rates continue to rise, Guanjun may experience a decline in profits, resulting in a decline in the amount allocated per fund unit and weakening the attractiveness of its weekly interest rate. Based on the average price-to-book ratio of 0.46 times in the past three years and the book value of 8.71 yuan per share in 2017, with a target price of 4.00 yuan, it is recommended to sell.

The rent at 3 Garden Road is expected to continue to rise-the overall rental income in 2016 rose 11.5% to 2.299 billion yuan, of which the occupancy rate of No. 3 Garden Road rose to 95.5% from 91.2% in 2015, and rental income increased by 19.7% year-on-year to 1.157 billion yuan, which became the driving force for last year's performance growth. The valuation of Guanjun's properties also increased by 3.2% year-on-year last year, mainly due to an increase in estimated rental values. The net asset value of each fund unit increased by 3.2% to 66.8 billion yuan. The vacancy rate of offices in Central remained at an all-time low in 2016, and there is still a lack of new supply in the market in 2017. it is expected that the trend of many Chinese financial institutions coming to Hong Kong to expand their business will continue, and the demand pressure on commercial buildings in Central will further stimulate the rent increase at 3 Garden Road. At the end of 2016, the current rent at 3 Garden Road increased by 3.7% year-on-year to $78.2 per square foot. At present, the newly signed lease is $110 per square foot.

The rental of Langhaofang Shopping Mall is affected by the retail market-the net property income of Langhaofang Shopping Mall under Guanjun was 691 million yuan, an increase of 1.8% year-on-year, mainly due to the increase in base rent. In 2016, mall tenants' annual sales fell by 4.9%, outperforming Hong Kong's total retail sales by 8.1%. However, the share rent fell 6.5 per cent year-on-year to 86 million yuan, dragged down by sales. Looking forward to 2017, it is expected to be the same as 2016. According to the Census and Statistics Department, total sales rose by about 2.3% in the fourth and third quarters of 2016, and the retail market is expected to recover slowly in 2017. however, as the government has not recently introduced measures beneficial to the inbound tourism industry, it is expected that the rental incentive effect on Langham place remains to be seen. Langham Square Shopping Mall and offices maintained a 100% occupancy rate in 2016. In view of the fact that there is no similar office space in Mong Kok in the same district to join the competition, it will consolidate the stability and competitiveness of its rental income.