Citigroup has issued a research report stating that the worst period for LINK REIT (00823) is over, with a series of positive developments emerging. These include improved retail tenant sales and stabilized cash rents in Hong Kong, the use of proceeds from the completed sale of Singapore retail assets for share buybacks, and the anticipated appointment of a new CEO in the first or second quarter of the 2027 fiscal year. The bank has upgraded its rating on LINK REIT from 'Neutral' to 'Buy' and raised its target price from HK$36.8 to HK$44.8.

The report notes that LINK REIT plans to fully utilize approximately USD 250 million (equivalent to about HK$1.5 billion) from the asset sale proceeds for share repurchases, representing about 1.4% of its market capitalization. The buyback is expected to commence in late June 2026 and could be scaled up depending on further asset sales and funding costs.

Citigroup estimates that LINK REIT's non-core assets have a book value of around HK$14.9 billion, constituting about 7% of its portfolio. These include office properties in Australia, the UK, mainland China, and logistics assets. Management has confirmed a strategy to recycle capital from these non-core assets.

The bank forecasts that LINK REIT's Hong Kong retail rental reversion rates will be negative 7% to 8% for the 2027 fiscal year but are expected to stabilize to a flat rate in the 2028 fiscal year. While market headwinds from retail rental reversals are well understood, management's efforts in leasing, tenant mix optimization, and cost restructuring are expected to cushion the impact on distribution per unit (DPU) for FY2027. Citigroup projects DPU to decline by approximately 2% year-on-year for the 2027 fiscal year.