Link REIT: Lack of Acquisitions After Rights Issue Continues to Weigh on Unit Price Performance

We lower no-moat-rated Link REIT’s fair value estimate to HKD 59.00 from HKD 62.30 after the pre-blackout meeting. We trimmed our rental growth assumption on the Hong Kong and China retail and office portfolio, given the slower-than-expected retail recovery in Hong Kong and the weaker economic outlook in China. We also increased our borrowing cost assumption for fiscal 2024-26 (ending March) as interest rates remain elevated. While we continue to see the 11% revenue growth in fiscal 2024 to be supported by the contribution of newly acquired Singapore retail assets and China logistics assets, we cut our distribution per unit, or DPU, forecasts for fiscal 2024-26 by 5%-7%, as we expect the finance cost to weigh on the bottom line. Our fiscal 2024 DPU forecast of HKD 2.45 implies a distribution yield of 6.7%, as of the Oct. 5 close price.