Among the major Hong Kong stocks, Link Real Estate Investment (HK:0823) has received a bullish stance from DBS following the release of its FY24 results. Notably, DBS analyst Jeff Yau confirmed a Buy rating on the stock, predicting a 33% upside potential. DBS’ team believes that the company has delivered a resilient performance in recent results, reflecting rental earnings growth in Hong Kong and recovery signs in China’s retail portfolio.
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Link Real Estate Investment is a REIT (real estate investment trust), with a varied portfolio that includes retail facilities, car parks, offices, and logistics assets in Asia.
Year-to-date, Link shares have lost over 22%.
Link Real Estate’s FY24 Results
In FY24, Link Real Estate’s revenue jumped by 11% to HK$13.5 billion, with net property income (NPI) rising by 9.5% to HK$10 billion. This was primarily due to rental income growth from the Hong Kong retail portfolio and the addition of the Singapore retail portfolio acquired in March 2023.
Consequently, the total distributable amount increased by 6.4% to HK$6.718 billion despite higher finance costs. However, the distribution per unit (DPU) fell by 4.3% year-over-year to 26.65 HK cents because of the higher number of units.
DBS’ Bullish Stance on Link REIT
DBS stated that Link Rental Estate reaps the benefits of diversification through strategic acquisitions, with an emphasis on acquiring suburban retail assets in Singapore and Australia.
Analyst Yau noted that regionally, the company’s reversion rate of 7.9% in Hong Kong will support the short-term rental income growth in the region. Meanwhile, the company is witnessing favourable signs in its retail portfolio in China, with rent reversions returning to a positive zone at 2.8%. As of March 31, 2024, the occupancy rate of Link’s retail portfolio in Mainland China was 96.6%.
Moving forward, DBS anticipates that the continued expansion of Link CentralWalk and Link Tianhe Plaza, along with the acquisition of the remaining 50% stake in Qibao Vanke Plaza, will further boost the company’s retail income growth in China. This, in turn, would help in maintaining a stable DPU in FY25.
Is Link REIT a Good Buy?
Aside from Yau, five other analysts reiterated a Buy rating on Link Real Estate stock following the recent results.
Overall, 0823 stock has received a Strong Buy consensus rating from analysts based on seven Buy recommendations over the past three months. The Link share price forecast is HK$43.96, which implies a huge upside of 29.3% from the current level.
