1HFY24 result preview
- 1HFY24 distribution income expected to remain broadly flattish, but DPU to drop by c.18% mainly due to increased number of outstanding units following the rights issue
- Improvement from Hong Kong retail portfolio should be partly offset by the drag from China portfolio
- Eyeing on unit buyback plan
Higher net finance cost to neutralize rental growth. Link REIT will announce its interim result this Wednesday (7 Nov). We forecast distribution income will remain broadly flat at HK$3.27bn, with higher rental earnings offset by increased net finance cost. However, due to a higher number of outstanding units following the rights issue in Mar-23, interim DPU is expected to drop c.18% y-o-y.
Improvement from Hong Kong retail portfolio to be partly offset by the drag from China portfolio. Total revenue is expected to rise by 11%, mainly driven by higher income from Hong Kong retail portfolio and maiden contributions from Singapore retail portfolio. This should be partly offset by lower income from China and overseas portfolio. With occupancy cost ratio low at 12.5%, reversionary growth for the Hong Kong retail portfolio, which was 97.9% let as of Jun-23, should remain robust at a positive mid- to high-single-digit for FY24. On the other hand, rental reversions for its China retail portfolio should remain under pressure in the near term. Net property income should grow by larger 12%, with overall NPI margin expected to improve to 23.8% (1HFY23: 24.1%). Key things to watch out for include tenant sales growth, reversionary growth outlook, occupancy trend, an update on asset acquisition and disposal, interest cost hedging, and share buyback plan, among others. We currently have a BUY rating with TP of HK$50.35.