JPMorgan has released a research report indicating that Link REIT's (00823) operational data for the first fiscal quarter ending in June shows its Hong Kong current rent continues to stabilize, although tenant sales performance has been somewhat disappointing. The firm maintains an "Overweight" rating on Link REIT with a target price of HK$43, as reported by Zhitong Finance.

The report highlights that tenant sales across Link REIT's Hong Kong properties declined 1.1% year-on-year in the first quarter, falling short of market expectations for slight positive growth and underperforming the 3.7% year-on-year increase in Hong Kong's essential consumer retail sales. However, the sequential decline in Hong Kong current rent narrowed further to 0.5%.

Management projects a negative mid-single-digit rent reversion for the first half of fiscal 2027, an improvement from the negative high-single-digit figure in fiscal 2026, though the full-year guidance remains at negative high-single digits. The bank believes Link REIT's latest data brings no surprises, but it still holds a positive outlook on the company's prospects, primarily due to stabilizing current rents and the potential for rent reversion to improve by fiscal 2028. Additional factors include investors potentially shifting from property developers to income-focused real estate stocks, ongoing unit buybacks, and a yield of 6.5% that remains among the highest liquidity in Hong Kong property stocks.

Link REIT's management reiterated its satisfaction with the guidance for stable distribution per unit in fiscal 2027, noting that progress toward the annual cost savings target of HK$200 million is on track. Furthermore, Link REIT stands to benefit from its potential inclusion in the Stock Connect scheme for REITs. Although no specific timeline has been set, the market has stopped pricing in this expectation, and if it materializes, the stock price could see a positive reaction.