According to Citigroup's research report, due to the long-term negative performance of office buildings and the consistently high interest rates, Champion Real Estate Investment Trust (02778) is expected to experience a 13% year-on-year decrease in DPU in the 2024 fiscal year, and a 4% decrease in DPU in both the 2025 and 2026 fiscal years. Considering the continuous decline in DPU, the bank has lowered the target price for Champion from HKD 1.59 to HKD 1.5 and given a 'sell' rating.
The bank expects a 13% year-on-year decline in DPU for the full year of the 2024 fiscal year, mainly due to the continued negative growth of rental income for Garden Road No. 3. The situation of lease renewals for the expiring leases in the 2025 fiscal year is key. The vacancy rate of the Langham Place office building increased by 6.2 percentage points to 12.9%, affected by the slow recovery of the beauty and tourism industries, and some tenants reducing their size. The average financial cost in the first half of this year was as high as 4.2%, and the proportion of floating rate loans reached 65%. The performance of the Langham Place mall is resilient, with high basic rents and tenant restructuring.