20171129-交银国际证券-领展房产基金-00823.HK-BOCOM_International_Securities_Ltd_5页_742kb

Link REIT (823 HK) Summary

Core Content

Link REIT ("Link") has completed the disposal of 17 properties at a total consideration of HK$23bn, which represents a 51.7% premium to the valuation of HK$15.2bn as of 30 September 2017. The disposal is expected to be completed by 28 February 2018, and the pro-forma Net Asset Value (NAV) per unit is projected to increase from HK$67.11 to HK$70.47. This enhancement is expected to benefit the unit price and improve the overall quality of the portfolio.

Main Points

• Disposal Overview:
  Link REIT disposed of 17 assets, totaling HK$23bn, which is 10% higher than the analysts' expectations. The disposal is viewed positively as it is 5% accretive to NAV per unit and provides a good price for the company.

• Proceeds Utilization:
  The proceeds from the disposal are expected to be used for:

  • New investments, including portfolio upgrades
  • Debt repayment
  • Unit buyback to neutralize DPU loss
  • Working capital

• Financial Impact:

  • The disposal is expected to incur a one-time expense of HK$372m but realize a disposal gain of HK$7,393m.
  • The disposal yield is approximately 2.8%, which is higher than Link's average borrowing cost of 2.5%, suggesting that significant debt repayment is unlikely.

• Portfolio Improvements:

  • The pro-forma average monthly rent is expected to rise from HK$59.0/sq ft to HK$61.2/sq ft.
  • Management efficiency is anticipated to improve due to increased geographical concentration of shopping malls in the portfolio.

• Market Reaction:

  • The disposal is expected to positively impact the market sentiment, with the unit price likely to benefit.
  • The analysts reiterate their Buy rating on Link REIT and maintain a Target Price (TP) of HK$77.70.

Key Information

• Current Trading Price: HK$70.00
• Upside: +11.1%
• DPU Yield: 3.6% (FY18E), 4.0% (FY19E)
• NAV per Unit (Pro-forma): HK$70.47
• Gearing Ratio: 17.0% (pro-forma)
• Total Portfolio Value (Pro-forma): HK$174,653m
• Number of Properties (Pro-forma): 109
• Total Area (Pro-forma): 8.219 million sq ft
• Occupancy Rate: 96.2% (pro-forma)

Summary of Disposal Details

Historical Disposal Trends

Analysts and Contact Information

• Philip Tse, CFA, FRM
  Email: philip.tse@bocomgroup.com
  Tel: (852) 3766 1815

• Alfred Lau, CFA, FRM
  Email: alfred.lau@bocomgroup.com
  Tel: (852) 3766 1807

Disclaimer

This report is confidential and intended for private circulation only to BOCOM International Securities Ltd's clients. It may not be copied, distributed, or used without prior written consent. The views and recommendations in this report are subject to change and may not reflect the views of BOCOM International Securities Ltd or its affiliates. Investors are advised to consult their financial advisors before making any investment decisions.