The Zhitong Finance App learned that Citi released a research report stating that it reaffirmed the “buy” rating of Lingzhan Real Estate Fund (00823) and a target price of HK$44.8. Lingzhan announced the acquisition of 50.1% interest in Eastpoint Mall (Eastpoint Mall) from Singaporean insurance company Singaporean insurance company for SGD 239.5 million (approximately HK$1.47 billion). Yingkang Insurance will retain the remaining 49.9% interest. The bank believes that the acquisition is in line with Lingzhan's strategic direction of recycling non-core assets and focusing on core retail properties in the Asia-Pacific region, and that the transaction scale is relatively small, so it will not significantly reduce the space for further repurchases.
Dongfu Square is located in the eastern suburbs of Singapore, directly connected to Simei MRT Station and has a leasable area of about 214,000 square feet. The transaction is expected to be completed in the first quarter of 2027, after which asset enhancement projects will be carried out in stages, and the mall will continue to operate during the renovation period.
Citi estimates that based on a monthly rent of SGD 15 per square foot and a net property income (NPI) profit margin of 75%, the acquisition price is equivalent to an NPI yield of about 6%. Since Lingzhan will act as the asset and property manager and can control tenant portfolio adjustments and leasing optimization, the bank believes that depending on the execution of asset enhancement projects and leases, the relevant properties may still have room for added value. Citi pointed out that this investment amount only accounts for 0.7% of the total asset base of approximately HK$220 billion, and has little impact on the overall asset portfolio, profit or leverage level. The 50.1% shareholding structure also helps reduce capital burden.
The bank believes that some investors may prefer that Lingzhan use the recovered capital for share repurchases. However, given the relatively small scale of the transaction, Citi believes that it will not drastically reduce the space for subsequent repurchases, and sees a possible increase in the share repurchase plan when the interim results are announced on November 12 as a key catalyst. Citi believes that with the continuous recovery of capital, implementation of share repurchases, and the stabilization of spot rents for retail properties, the fundamentals of Lingzhan are gradually bottoming out, and overall shareholder returns are attractive.