[ET Net News Agency, 16 January 2018] Morgan Stanley lifted its target price for
Champion REIT (02778) by 2% to HK$6.1, and maintained its "equal-weight" rating.
The research house raised Champion REIT's FY2018-20 DPU estimates by 4-7% to reflect
improving outlook on discretionary retail hence rental income from Langham Place Mall.
Also, Morgan marked to market the latest office spot rents at Three Garden Road in
Central, hence stronger rental growth.
It said Champion REIT's risk-reward looks fair with high upside and downside risk,
depending on Langham Place Office disposal and the potential special dividend from
disposal proceeds.
Morgan said Champion REIT's DPU growth should slow to 4%/1%YoY in FY2017/18, much lower
than the 16% YoY growth achieved in FY2016. Slowing distribution growth is attributable to
the diminishing impact of Central office portfolio occupancy improvement, negative rental
reversion at its retail portfolio, and rising interest rates.
But it noted that the company has higher-than-peers sensitivity to interest rates, with
a high floating debt ratio (75%) and a low cap rate adopted for its Central office
portfolio (3.6%). (KL)