Goldman Sachs has released a research report maintaining a 'Neutral' rating on Link REIT (00823), with a target price of HK$41.3, based on a discounted cash flow valuation using a weighted average cost of capital of 7.2% and a terminal growth rate of 2%.

The bank believes that with a distribution per unit of HK$2.54 for fiscal year 2026, the current dividend yield of approximately 6.4% is reasonable, given the slower earnings growth expected in fiscal years 2027 and 2028. Potential upside is seen from the execution progress on the remaining non-core asset portfolio, which is valued at around HK$19 billion.

Link REIT announced the sale of its 50% interest in the 100 Market Street office tower in Sydney to Aware Real Estate for AUD $225.9 million. The transaction price represents a net income yield of 6.5%, which is a 27% increase in net income compared to when it was acquired in 2019.

The bank views this sale as within expectations, reflecting management's commitment to divesting non-core assets and its willingness to accept current market valuations. Goldman Sachs noted that this particular asset sale accounts for less than 1% of Link REIT's total asset portfolio, with a minimal impact on earnings, estimated at less than 0.1%.

The net proceeds from the sale are approximately HK$1.2 billion. The group intends to use part of the funds for share buybacks and the enhancement of its Hong Kong retail assets. Combined with the earlier sale proceeds from Thomson Plaza in Singapore, Link REIT has now cashed out approximately HK$2.7 billion, which theoretically could fund the repurchase of up to 2.6% of its issued shares, helping to offset the negative impact from the rental revaluation of its Hong Kong retail portfolio.