UBS boosted its target price for Link REIT (00823.HK) to HKD 47.2 from HKD 42, citing significant upside potential from asset recycling and share repurchases that it believes is not yet reflected in the company's valuation.
The investment bank maintained its "Buy" rating on the real estate investment trust in a report, arguing that a strategic disposal of non-core assets could unlock substantial value for shareholders. The new target price represents a 12.4% increase from the previous figure.
The upgrade is based on the identification of a potential HKD 34 billion, or about 15% of total assets, in non-core holdings that could be divested. UBS suggested that following recent sales of assets in Singapore, Australia, and the United Kingdom, Link REIT could next look to sell logistics assets in China and underperforming malls in Guangzhou and Beijing.
Despite the bullish outlook on asset sales, UBS acknowledged weak near-term fundamentals. The bank forecasts Link REIT’s distribution per unit for the 2026 fiscal year to decline by 8% year-over-year to HKD 2.51. It also expects the reversion rate for its Hong Kong retail portfolio to remain negative at -8%.
However, UBS believes the potential for a large-scale capital return outweighs the immediate operational headwinds. The report highlighted that Link REIT’s current dividend yield of over 6% is already more attractive than peers like Hang Lung Properties and Wharf REIC, which are in the 5.3% to 5.8% range.
The successful execution of its asset disposal and share buyback strategy could act as a major re-rating catalyst for the trust. Investors will be watching for details on this plan when Link REIT announces its full-year results on May 28.
This article is for informational purposes only and does not constitute investment advice.
