Rental reversion is expected to stay solid.
Rental reversion is still very positive so far in the 2H of FY13 (25.9% in 1H). Webelieve the reversion can remain solid for some time, driven by 1) above-averagereversions in the second rental cycle for malls that have undergone AEI 3 yearsago and 2) larger rental increase for under-priced leases, as Link has more tenantsales data now. Currently, Link has sales data for 90% of its tenants vs. 70-80% ayear ago. Despite a slowdown in overall retail sales growth in HK, retail sales atLink’s malls have stayed solid, given its high exposure to non-discretionary tradesand a strong labor market for the blue collar group; it has little exposure to the realestate category.
Car park rates still have room to grow.
There is still likely room to raise car park monthly rates next year, as Link’s carpark rates are typically at the low end of the competitors’ range in theirneighborhoods. (Its average monthly car park rate was HK$1,338 per month in 1HFY13.) We also note that there is likely room for Link’s valuer to lower the cap ratefor Link’s car parks, given rising unit prices of car parks post the introduction ofthe Buyer’s Stamp Duty (BSD). The cap rate applied by the valuer for Link’s carpark at Sep 2012 was 7.21%.
NPI margins could expand by a further 1-2ppts.
Given strong rental reversion and cost-control initiatives, Link believes NPImargins could expand by a further 1-2ppts in the medium term from the 70.6%level in 1H FY13. While occupancy is already quite high at its largest malls(97.7%), there is still room to improve at its smallest 50 malls (88.5%), whichcould drive further margin expansion. Similarly, car parks could see highermargins (64.5%) if occupancy continues to rise.美林证券
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