Analysts at Citigroup have issued a report noting that LINK REIT (00823) initiated a unit buyback program last Thursday. On the first day, the company repurchased 1.57 million units at an average price of HK$37.816. The company has indicated it will fully utilize the S$250 million (approximately HK$1.5 billion) proceeds from the sale of Thomson Plaza for this buyback, which equates to roughly 1.5% of its market capitalization. The buyback could potentially be increased further depending on additional capital recycling activities, such as those involving properties like The Cabot in London and 100 Market Street in Sydney.
Citigroup has maintained its 'Buy' rating on the stock with an unchanged target price of HK$44.8. The firm estimates that LINK REIT has a potential pipeline of non-core assets available for sale worth around HK$14.9 billion, representing about 7% of its investment portfolio. With the share buyback now underway, the stabilization of rents in its Hong Kong retail portfolio benefiting from a modest recovery in tenant sales, and the appointment of a new Chief Executive Officer, Citigroup believes the company's fundamentals are bottoming out and improving. This combination of factors is seen as offering attractive total shareholder returns.
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