Morningstar: LINK REIT(00823) 's performance in retail leasing in mainland China and Hong Kong is weak. The reasonable valuation is HK$45 per unit. The expected annual dividend yield is 6.6%.

Morningstar's research report states that, after adjusting assumptions, they maintain the fair value estimate of 45 Hong Kong dollars per unit for LINK REIT (00823). The unit's current value is undervalued, with a forecasted distribution per unit of 2.57 Hong Kong dollars for the fiscal year 2026, reflecting an attractive yield of 6.6%. For the half-year ending in September of this year, Link REIT's net property income decreased by 3.4% year-on-year, mainly due to continued rental decline in its retail property portfolios in Hong Kong and Mainland China. The interim distribution per unit dropped by 5.9% to 1.27 Hong Kong dollars. The bank believes that the weak performance aligns with expectations. Morningstar estimates that the headwinds facing the retail sector will continue to reduce rental income through negative rent reversion in the fiscal year 2026, with the expectation that rental income for the Hong Kong retail property portfolio will stabilize in the 2027 fiscal year. Furthermore, the rental reversion for the Mainland China retail property portfolio is -16.4%, as Link REIT prioritizes maintaining occupancy rates by lowering rents. Link REIT is restructuring its assets in Beijing, with retail sales in Shanghai stabilizing. Link REIT's diversification strategy has been effective, with strong performance in its Australia and Singapore retail assets (both showing double-digit positive rental reversions), offsetting the weaker performance in the Greater China region.