UBS has released a research report, raising the target price for LINK REIT (00823) from HK$42 to HK$47.2. This adjustment reflects the potential for asset recycling and share buyback programs. The firm has assigned a "Buy" rating to the stock.
The report notes that LINK REIT is scheduled to announce its financial results for the fiscal year ending March 2026 on May 28. UBS forecasts a year-on-year decline of 8% in distribution per unit to HK$2.51 for FY2026. The rental reversion rate for Hong Kong retail properties is expected to be negative 8%, compared to negative 7.5% for the first nine months of FY2026 ending December last year. While short-term fundamentals remain weak, the firm sees upside potential from potential asset recycling and share repurchases.
Following the sale of Thomson Plaza and office assets in Australia and the UK, UBS suggests that logistics assets in mainland China could be the next divestment target for LINK REIT. Underperforming shopping malls in Guangzhou and Beijing are also identified as potential mid-term disposal candidates. Overall, the scale of non-core assets could reach approximately HK$34 billion, representing about 15% of the total asset value. The current share price still offers a dividend yield exceeding 6%, significantly higher than peers such as Hang Lung Properties, Wharf REIC, and Hysan Development, which range between 5.3% and 5.8%. UBS believes the market has not yet fully priced in the stock's re-rating potential.
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