The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that the operating data of Lingzhan Real Estate Fund (00823) for the first fiscal quarter up to the end of June showed that spot rents in Hong Kong continued to stabilize, but merchant sales performance was slightly disappointing. The bank maintains Leading's “Overweight” rating, with a target price of HK$43.
According to the report, the sales volume of leading Hong Kong property merchants fell 1.1% year on year in the first quarter, falling short of the positive increase expected by the market. It also outperformed the 3.7% year-on-year increase in retail sales of essential consumer goods in Hong Kong. However, the month-on-month decline in spot rents in Hong Kong narrowed further to 0.5%. Management expects the rent rescheduling rate for the first half of FY2027 to be negative for the number of units, an improvement from the number of negative high units in FY2026, but the guidance for the whole year remains negative for the number of high units.
The bank believes that the latest data from Lingzhan did not bring any surprises, but it is still optimistic about its prospects, mainly because immediate rent stabilization and rent rescheduling is expected to improve in the 2028 fiscal year; investors may switch from real estate developers to leasehold shares; continued unit repurchases; and the 6.5% yield is still one of the most liquid in Hong Kong real estate stocks. Leading management reiterated that it was “satisfied” with the guidelines for stable allocation of each fund unit in FY2027, and the goal of saving HK$200 million in annualized costs is progressing well. Furthermore, Lingzhan is expected to benefit from REITs being included in the Hong Kong Stock Connect. Although there is still no specific schedule, the market no longer reflects relevant expectations, and if future events happen, the stock price may respond positively.