DBS: Raises the target price of PROSPERITY REIT to HKD 1.71, expects a 3% increase in annual distribution per fund unit

DBS released a research report stating that the occupancy rate of the properties under Prosperity REIT remains around 94%, with limited short-term vacancy risks. Although the expected decline in renewal rents is anticipated to widen compared to the 6.4% for the fiscal year 2024, the expected earnings performance will be supported by reduced interest expenses due to the decline in HIBOR. The bank maintains a "Buy" rating on Prosperity REIT, raising the target price from HKD 1.58 to HKD 1.71, predicting that the distribution per unit (DPU) will grow by about 3% in 2025, with an annual distribution yield of approximately 9%. The bank expects that favorable policies will continue to be the main catalyst for the stock price, and if the Chinese government introduces policies to boost Hong Kong's economic growth, it is believed that this will benefit office leasing demand and sentiment in the REIT sector. Additionally, any progress regarding the inclusion of REITs in the "Hong Kong Stock Connect" may also serve as a catalyst