UBS issued a research report stating that it has downgraded KERRY PPT (00683) earnings forecasts for this year and next by 25% to 27%, reflecting the latest development project completion schedules, lower profit margin forecasts, and reduced interest capitalization. However, the firm raised the group's target price from HK$21.4 to HK$24 while maintaining a "Buy" rating.

The bank believes that the development of China's private real estate investment trust (REIT) market could provide new channels for capital recovery for Hong Kong developers like KERRY PPT. Following KERRY PPT's potential sale of "Jinling Residences" Phase II in the second half, investors are focusing on future catalysts for the company.

The bank considers private REITs as a catalyst for asset recovery, as over 40% of Kerry's asset value is related to mainland investment properties. The firm estimates that 68% of its mainland investment properties meet private REIT requirements. Based on Kerry's current price-to-book ratio of 0.29x and conservative mainland investment property capitalization rates of 4.8% to 7%, the bank believes asset divestiture should drive its share price higher.

The bank expects Kerry's first-half earnings to be below HK$1 billion, with projected comprehensive Hong Kong development property profit margins of 15%, similar to last year. Regarding investment properties, the firm anticipates the group will record mid-single digit declines in rental income in both Hong Kong and the mainland.