[ET Net News Agency, 25 April 2018] Goldman Sachs reinstated coverage on Link REIT
(00823) with a new target price of HK$75 (from HK$64.6 previously), and a "neutral"
rating.
The research house said Link completed a 17-asset disposal at HK$23bn by end-February
2018, and the transaction was done at a price that was 52% higher than the original book
value of HK$15bn. As a result, Link REIT will recognize a HK$7.4bn disposal gain in
March-FY2018.
Post the transaction, pro-forma gearing (debt/asset) is only 15%, which Goldman believes
implies large capacity for de-leveraging as well as the potential for share buybacks (to
neutralize revenue loss) and new M&A.
Goldman revised its FY2018-20 EPS forecasts by 250%/11.2%/5.1%, mainly to factor in the
recent disposal gain, and recent share buybacks. It looks for a DPU CAGR of 10% for the
next three years, driven by a 5% revenue CAGR amid lower financing costs on Goldman's
estimated HK$10bn debt reduction post disposals. (KL)