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<Research Report>M Stanley Upgrades LINK REIT (00823.HK) to Overweight, TP Stays at $62
2023/03/29 10:16
Morgan Stanley increased the rating of LINK REIT (00823.HK) from Equal-weight to Overweight, but kept its $62 target price in a research report.

Morgan Stanley noted that since the announcement of the rights issue, the share price of LINK REIT has retreated by about 20%, exceeding the bank's estimate of 8-11% dilution effect on the book value of the rights issue and the distribution per unit.

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The investment bank believed that since the rights issue was closed to trading on 16 March, the selling pressure is expected to subside and offers an attractive entry point. Morgan Stanley also focused on its 5.7% dividend yield, strong balance sheet and re-accelerated growth.

As for operations, LINK REIT's lease renewal rentals expanded to 8.5% in the first half of last September, up from 5.8% in the second half of FY2022, and tenant occupancy costs fell to 12.6% in the first half; tenant sales rose 3.8% and the investment bank expected it to rise further in the second half of the year.

The investment bank also believed that its lower leverage after the rights issue could supports future acquisitions with consortium partners and future growth.

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