Damo: The performance of Lingzhan Real Estate Fund (00823) in the second half of the fiscal year or the difference in annual distribution compared to the first half of the year is expected to remain the same

The Zhitong Finance App learned that Morgan Stanley released a research report saying that in the first quarter of the 2027 fiscal year, that is, until the end of June 2026, overall merchant sales fell 1% year over year. Among them, the performance of the catering business continued to improve, up 1.5% year on year; supermarket performance was still weak, down 1.9% year on year. Morgan Stanley gave Lingzhan an “gain” rating, with a target price of HK$44.

Management expects that in the first half of fiscal year 2027, that is, until the end of September 2026, property rent renewals in Hong Kong fell 5% year on year, improving from the 8.2% decline for the full year of FY2026 and the 6.4% decline in the first half of FY2026, but will still maintain the guideline of 8% year-on-year decline in rent renewal for the full fiscal year, which means that the performance in the second half of the year will be worse than in the first half of the year.

Morgan Stanley pointed out that Lingzhan's annual cost reduction plan of HK$200 million is progressing well. Through cost cuts and share repurchases, the allocation per fund unit in FY2027 is expected to remain flat year-on-year, and financing costs will remain 3.4%. The Anderson Road project has been pre-leased 80% and is scheduled to open in October this year. The bank is expected to support rental income for the 2028 fiscal year.