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Investing.com - HSBC downgraded Link REIT (HK:823) (OTC:LKREF) from Buy to Hold and lowered its price target to HK$40.00 from HK$45.00 following weaker-than-expected financial results.
Link REIT reported first-half fiscal year 2026 results showing a 5.9% year-over-year decline in distribution per unit (DPU), a steeper drop than anticipated, following a 3.7% increase in the second half of 2025.
While the Hong Kong mall portfolio maintained a high occupancy rate of 98% in the first half, tenant sales fell 2.1% year-over-year, underperforming the broader market despite early recovery signs.
The retail rental reversion deteriorated to -6.4%, compared to -5.1% in the second half of fiscal year 2025, indicating worsening rental conditions for the real estate investment trust.
HSBC analysts anticipate Link REIT’s DPU could decline further in the second half of fiscal year 2026 before gradually stabilizing in fiscal year 2028, noting that despite an attractive 6.5% yield, the REIT faces limited short-term catalysts.
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