DBS: Maintains "buy" rating on FORTUNE REIT (00778) with target price lowered to HK$4.95

DBS released a research report stating that they maintain a "buy" rating on FORTUNE REIT (00778), with a target price lowered to HK$4.95, believing that the worst time has passed. Fortune's portfolio occupancy remains stable at 95%, compared to 94.8% in June last year. The occupancy rate for Fortune City reached 87.1%, while WOO Jiahu reached 93.4%. Since the third quarter of last year, Fortune's overall tenant sales have started to narrow year-on-year, especially with supermarket tenants. With the decline in rents for kindergartens and real estate brokerage tenants, the prospects for rent revaluation this year are expected to gradually improve. The bank mentioned that due to higher than expected capital expenditure requirements, Fortune has postponed the planned upgrade of the Red Wharf Fortune City project in the fourth quarter of last year. Although it is expected that the Hong Kong Interbank Offered Rate (HIBOR) will decrease, the company estimates that cash financing costs will remain stable this year. Furthermore, the bank believes that the distribution yield for Fortune in 2024 and 2025 is around 8.8% to 8.5%. Any positive progress in including Real Estate Investment Trusts (REITs) in the mutual market access scheme can boost market confidence in this sector. The market's concerns about the slowdown in rate cuts have largely been reflected in the stock price.