On Wednesday, Jefferies updated its stance on Link REIT (823:HK) (OTC: LKREF), increasing the price target to HK$42.00 from the previous HK$41.00. The firm continues to recommend a Buy rating for the stock.
The update follows a recent briefing where management provided guidance for the fiscal year ending March 25, 2025 (FY3/25). They expect rental reversion to be flat to low single-digit percentages and finance costs to remain under 4%, noting the previous year's finance costs were at 3.78%.
The company's outlook for distribution per unit (DPU) appears relatively stable, with a forecast of HK$2.69 for FY3/25, which would represent a 7.8% yield. This expectation is partly based on the contribution from a newly acquired asset, Qibao. Additionally, management outlined a new strategic direction, which includes a potential expansion into the Japanese market.
Jefferies' position reflects a preference for Link REIT over other real estate investment trusts focusing on discretionary retail, such as WREIC and Hang Lung Properties. The firm's assessment suggests confidence in Link REIT's strategy and financial projections, particularly in light of the competitive landscape within the sector.
The updated price target suggests that Jefferies sees further growth potential for Link REIT, which is currently positioned to capitalize on its new assets and strategic initiatives. The guidance provided by the company's management appears to reinforce the stability and attractiveness of the REIT's financial outlook.
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