Goldman Sachs: Leading Real Estate Fund (00823) can potentially repurchase up to 2.6% of issued shares to maintain a “neutral” rating

The Zhitong Finance App learned that Goldman Sachs released a research report stating that it maintains the “neutral” rating of the Leading Real Estate Fund (00823), with a target price of HK$41.3, based on discounted cash flow valuations, a weighted average capital cost of 7.2% and a terminal growth rate of 2%. The bank believes that, based on the distribution of HK$2.54 per fund unit in FY2026, the current dividend rate is about 6.4%, and profit growth from FY2027 to FY2028 has slowed to a reasonable level for subordinates. Potential upside comes from the implementation progress of the remaining non-core asset portfolio (valued at around HK$19 billion).

Lingzhan announced the sale of 50% interest in Sydney's 100 Market Street commercial building to Aware Real Estate for Aware Real Estate for Aware Real Estate. The transaction price was equivalent to a 6.5% return on net revenue, an increase of 27% over the net revenue at the time of acquisition in 2019. The bank believes that the sale was within expectations, reflecting management's commitment to divestment of non-core assets and willingness to accept the current market valuation.

Goldman Sachs pointed out that the assets sold only occupied less than 1% of the total asset portfolio of the exhibition, and the impact on profit was limited. It is estimated to be less than 0.1%. The net proceeds from the sale are approximately HK$1.2 billion. The Group plans to use part of the capital for share repurchases and the enhancement of retail assets in Hong Kong. Together with the proceeds from the earlier sale of Thomson Plaza in Singapore, Lingzhan has now cashed out about HK$2.7 billion. Theoretically, up to 2.6% of the issued shares can be repurchased, helping to offset the negative impact of the Hong Kong retail portfolio rent revaluation.