Morningstar: Maintains Fair Value Estimate of HKD for Link REIT; Hong Kong Retail Rents Expected to Improve Starting in 2027

SadMoneyMeow · 2026-03-17T13:14:42+00:00

Morningstar maintains its fair value estimate of (00823) at HK$45 per unit, believing that its distribution per unit is undervalued, with an expected dividend yield of 7% for fiscal year 2026. Despite negative renewal rents for Hong Kong retail properties, overall occupancy rates remain above 95%, with rental rates expected to gradually recover in the future.

SadMoneyMeow

2026-03-17 13:14:42

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Morningstar has published a research report maintaining its fair value estimate of HKD 45 for Link REIT (00823), a company without a moat. The company’s per-unit distribution is currently undervalued, with the trading price at an 18% discount to Morningstar’s valuation. Link REIT is the top pick among Hong Kong real estate stocks tracked by the firm. The firm forecasts a per-unit distribution of HKD 2.57 for fiscal year 2026, implying a 7% dividend yield, which is quite attractive and likely appealing to investors who are not concerned about short-term adjustment pressures.

Morningstar states that Link REIT reported operational data for the first nine months of fiscal year 2026, with overall retail property occupancy rates exceeding 95%, and renewal rents for Hong Kong retail properties declined by 7.5%. This performance aligns with the firm’s expectations. Management indicated that renewal rents for Hong Kong retail properties are negative, reflecting moderate rent increases during the previous leasing cycle as borders reopened. Negative renewal rents may persist into fiscal year 2027 (ending March).

On the positive side, in recent months, tenant sales at shopping centers across Hong Kong and mainland China have improved, mainly due to portfolio optimization. The firm expects this will boost tenant confidence and support gradual rent recovery starting from fiscal year 2028. The international retail property portfolio remains resilient, benefiting from limited retail supply in Singapore and gradually improving consumer confidence in Australia. The firm expects Link REIT’s overseas assets will continue to achieve stable rent growth.

(Edited by: Dong Pingping)

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