- March 05, 2021
We believe Yuexiu REIT (405.HK) is bouncing back from a tough 2020 hampered by COVID-19 and weaker-than-expected 2019 results. Wuhan Fortune Center and Guangzhou Four Seasons Hotel have shown signs of recovery in 2H20 and we expect that recovery trend to continue in 2021E. Reiterate Buy.
For more details, please kindly see our full report attached.
Key Highlights:
- We believe that Yuexiu REIT’s recovery from the impact of COVID-19 has begun since 2H20 and will extend into 2021E.
- We believe interest savings from historical low USD/HKD interest rates and the macro recovery from COVID-19 will be the key drivers of its 2021E results.
- This can be seen through the improvement in occupancy rates and revenues from Wuhan Fortune Center during 2020, as well as occupancy rate improvement at the Four Seasons Guangzhou during 2H20.
- We expect operations to normalize in 2021E with Revenue, NPI and DPS recovering back to 2019 pre-COVID levels.
- We believe Yuexiu REIT’s defensive 0.8x Beta and 7.1% 2021E div yield will attract investors’ attention and thus drive a yield compression for the stock to reach our target price of HK$4.99/sh.
