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Investing.com - HSBC downgraded Fortune REIT (HK:778) from Buy to Hold while simultaneously raising its price target to HK$5.39 from HK$5.00, according to a research note released Wednesday.
The Hong Kong-based real estate investment trust, which focuses on retail properties, received the rating adjustment despite HSBC’s upward revision of its 2025-27 distribution per unit (DPU) estimates by 0.5-4.0%. These revisions reflect updated rental and occupancy assumptions coupled with lower finance costs.
HSBC analyst Raymond (NSE:RYMD) Liu noted that the new target price is based on a 50:50 weighting of dividend discount model and net asset value-based valuations. Fortune REIT currently trades at a dividend yield of 7.1% based on 2025 estimates.
The downgrade comes with several identified downside risks, including potential weaker-than-expected rental performance in the +WOO mall in Tin Shui Wai, a lower payout ratio, and a possible spike in HIBOR leading to higher interest expenses.
HSBC also highlighted potential upside risks for Fortune REIT, including positive developments on REIT Connect that could broaden its shareholder base and a possible resumption of yield-accretive project acquisitions.
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