Buy Recommendation for SF Real Estate Investment Trust Backed by Strong Parent Support and Attractive Yields

In a report released on March 14, Percy Leung from DBS maintained a Buy rating on SF Real Estate Investment Trust (8ET – Research Report), with a price target of HK$3.70.

Percy Leung has given his Buy rating due to a combination of factors influencing the SF Real Estate Investment Trust. One of the primary reasons is the strong support from its parent company, S.F. Holding, which guarantees the leases of over 80% of the gross lettable area with a long-term expiry profile and annual rental increases. This provides a stable income stream and enhances the trust’s financial resilience.
Additionally, despite a reduction in the FY25 forecasted distribution per unit, the trust offers attractive distribution yields of 8.3-7.8% for FY25-26, making it an appealing investment. The decision to maintain a payout ratio of 90% for the latter half of FY24 is aimed at preserving capital amid challenging conditions, which is seen as a prudent move. The upcoming lease renewals with SFH Group, set for 2026, are also expected to significantly impact the trust’s earnings and unit price performance, reinforcing the Buy recommendation with a target price of HKD3.70.