[ET Net News Agency, 6 January 2020] DBS Group Research cut its target price for
Fortune REIT (00778) to HK$10.9 from HK$11.8 and maintained its "buy" rating.
The research house said Fortune REIT's portfolio occupancy currently stays firm at
97% (June 2019: 97.4%) despite challenging retail environment led by the ongoing social
unrest. Reversionary growth for 2H 2019 should moderate to 5% from 1H 2019's 7.8%.
Education and community service tenants registered better-than-average reversionary
growth. On the contrary, rental reversion for general retail trades could have turned
negative, DBS noted.
In FY2020, more than 30% of the REIT's leases are scheduled for renewal. In general,
retailers have been shelving their expansion plans amid the US-China trade disputes and
prolonged protests. This should weigh on leasing demand for retail space. Lease renewal
negotiations with existing tenants are proceeding slowly due to the uncertain market
outlook. Fortune REIT has adopted a more flexible leasing strategy in order to maintain a
higher retention rate. (KL)