[ET Net News Agency, 21 November 2019] Morgan Stanley lowered its target price for
Champion REIT (02778) to HK$5 from HK$5.7 and maintained its "underweight" rating.
The research house said Chinese tourists accounted for 78% of visitor arrivals to HK in
2018. It estimated they contributed 30% of overall HK retail sales and 50-60% of luxury
retail in 2018.
With diminishing pricing gaps between China onshore (including duty-free) and HK, and
improving sales channels in China (both offline and online), Morgan expects HK to face
decreasing wallet share of Chinese luxury spending.
It said Champion REIT has high discretionary retail exposure at 32% to total revenue in
2018. Morgan cut 2020 and 2021 EPS estimates by 6% and 8% as it expects retail rental
income to decline every year starting from 2H 2019. Morgan expects this trend to continue
in 4Q. It does not expect meaningful retail sales recovery even if tourist arrivals
recover in 2020. It also lowered its 2020-21 DPS forecasts by 6% and 8%. (KL)