Morgan Stanley has released a research report indicating that Link REIT's (00823) overall tenant sales declined 1% year-on-year during the first quarter of fiscal 2027, which ended June 2026. Within this period, the food and beverage segment continued to show improvement, recording a 1.5% year-on-year increase, while the supermarket segment remained weak, with sales falling 1.9% year-on-year. The firm has assigned an "Overweight" rating to Link REIT with a target price of HK$44.

Management anticipates a 5% year-on-year decline in rental renewals for Hong Kong properties during the first half of fiscal 2027, which runs through September 2026. This marks an improvement from the 8.2% decline seen in full fiscal 2026 and the 6.4% drop during the first half of that fiscal year. However, the company has maintained its full-year guidance for an 8% year-on-year decrease in renewal rents, implying that the second half of fiscal 2027 will likely be worse than the first half.

Morgan Stanley noted that Link REIT's HK$200 million annual cost-saving program is progressing well. Through cost reductions and share buybacks, the company's distribution per unit for fiscal 2027 is expected to remain flat year-on-year, with financing costs steady at 3.4%. Additionally, the Anderson Road project has achieved 80% pre-leasing and is slated to open this October, which the bank believes will provide support to rental income for fiscal 2028.