Morgan Stanley: Raises targets for SWIRE PROPERTIES (01972) and LINK REIT (00823)

Morgan Stanley released a research report stating that it has lowered its profit forecast for SWIRE PROPERTIES (01972) for the next two years by 16% to 27%, reflecting the latest retail sales, rental and occupancy assumptions after the company's performance last year. At the same time, the dividend per share forecast is raised by 6% to 10%, reflecting the gradual dividend growth of the mid-term unit numbers, supported by cash flow from core investment property portfolios, disposal of non-core assets, and sales revenue from China development projects. The bank has raised the target price of SWIRE PROPERTIES from HK$16 to HK$18, discounting the net asset value by 55% for 2025, below one standard deviation from the long-term historical average, as the bank believes there is still a supply-demand imbalance in the office market. The bank also kept its profit forecast for LINK REIT (00823) for the 2025-2027 fiscal year basically unchanged, with expected growth in distribution per unit of 0.3% to 0.9%, reflecting the latest retail sales, rental and occupancy assumptions. The target price has been raised from HK$41 to HK$48, based on the distribution per unit for the 2025 fiscal year and slightly below the long-term average dividend yield by 1.5%, assuming a 4% yield on US 10-year Treasury bonds. The bank reiterates its "hold" rating for LINK REIT, believing that LINK REIT is a major beneficiary of the downward cycle in US interest rates and potential inclusion in the Hong Kong Stock Connect program.