Bank of America Securities: Leading Real Estate Fund (00823) Valuation Attracts and Potential Catalysts to Maintain “Buy” Ratings

The Zhitong Finance App learned that Bank of America Securities released a research report saying that after Lingzhan Real Estate Fund (00823) announced the renewal for the first fiscal quarter ending at the end of June, the bank believes that its argument of gradual stabilization is still valid, but there is little chance of quickly reversing the situation. The bank believes that Lingzhan's valuation has attracted and has potential catalysts to maintain a “buy” rating and target price of HK$46. The predicted dividend rate of 6.4% for the 2027 fiscal year is still attractive, and is supported by Hong Kong's stable fundamentals, non-core asset sales and repurchase units.

On the positive side, retail real-time rents in Hong Kong continued to stabilize month-on-month, while retail rent renewal rates in the Mainland increased 2.7% year over year. Management expects the retail rent adjustment in Hong Kong to maintain negative mid-single-digit growth in the first half of fiscal year 2027 ending at the end of September, but due to the high comparison base for the second half of the fiscal year ending at the end of March next year, it will still maintain the target of a high single-digit decline for the whole year.

On the other hand, retail tenant sales in Hong Kong fell 1.1% year-on-year in the first fiscal quarter, an implicit increase of 0.5% compared to the final fiscal quarter ending at the end of March. Management reiterated the goal of allocating roughly the same amount of funds to each fund unit in FY2027, but was more cautious due to risks such as rising interest rates and utility costs. Assuming there is no significant increase in interest rates, the bank predicts a 2% year-on-year decline in allocations per fund unit in the first half of the fiscal year and 2027 fiscal year.