Positive Outlook for Link REIT: Buy Rating Justified by Strong DPU Growth and Strategic Market Adaptation

CGS-CIMB analyst has reiterated their bullish stance on LKREF stock, giving a Buy rating today.

CGS-CIMB’s rating is based on several positive indicators for Link Real Estate Investment. Despite facing challenges in the Hong Kong retail market, Link REIT managed to increase its distribution per unit (DPU) by 4% in the fiscal year ending March 2025, surpassing expectations. This growth was supported by higher ancillary income from Hong Kong malls and tax benefits from operations in China. Additionally, the company has been optimizing its tenant mix to adapt to changing consumer behaviors, securing new leases in emerging sectors like education and family entertainment.
Moreover, CGS-CIMB anticipates a potential reduction in borrowing costs for Link REIT if the low Hong Kong Interbank Offered Rate (HIBOR) persists, which could further enhance financial performance. The company’s retail performance in Southern China and other regions like Singapore and Australia has been positive, with high occupancy rates and rental reversions. These factors, combined with the expectation of Link REIT’s inclusion in Stock Connect, contribute to a favorable outlook, justifying the Buy rating with an increased target price.

In another report released today, DBS also maintained a Buy rating on the stock with a HK$41.65 price target.