Morningstar maintained its fair value estimate for LINK REIT (00823) at HK$45 per unit after adjusting assumptions, noting the current unit price is undervalued. The firm forecasts a distribution per unit of HK$2.57 for FY2026, implying an attractive yield of 6.6%.

For the six months ended September, LINK REIT's net property income fell 3.4% YoY, primarily due to ongoing rental declines in its Hong Kong and mainland China retail portfolios. Interim distribution per unit dropped 5.9% to HK$1.27. Morningstar views this weakness as in line with expectations.

The research house expects retail sector headwinds to continue pressuring FY2026 rental income through negative rental reversions, with Hong Kong retail portfolio rents likely stabilizing only by FY2027. Mainland China retail properties saw a -16.4% rental reversion as LINK REIT prioritized occupancy through rent reductions.

While restructuring its Beijing assets, LINK REIT has achieved stabilized retail sales in Shanghai. Its diversification strategy is proving effective, with strong double-digit rental growth in Australian and Singaporean retail assets offsetting Greater China's soft performance.