2/6/2018-10

Exhibition: The retail market is improving

Lexington (00823) last year renewed rent adjustment rate (average three-year lease) rose to a new high of 29.1%, the analysis believes that this year’s retail market is buoyant, but due to the relatively small luxury goods of the exhibition, the rent adjustment will be necessary in the next three years. It is difficult to maintain the current level, but it is expected that there will be more than 20% growth.

Chief Executive Officer Wang Guolong stated that this year’s retail market has improved. The speed of negotiating leases with different tenants has been faster than before in the past few months. However, most of the property portfolios of the Lian Chin Group are daily necessities, and luxury goods account for a small proportion and are expected to grow. It will be slower than the overall retail market in Hong Kong. However, due to the drop in the unemployment rate, the market sentiment will improve and the rent will still have an ideal growth.

In terms of property portfolio in Hong Kong, the occupancy rate improved to 97% last year, and the rate of renewed rental adjustment for the year was 29.1%, which was significantly better than the 23.8% of the previous year. Among them, the increase in the number of merchants reached 31.2%, an increase of 7.8 percentage points year-on-year; the number of stalls in the market/cooked foods was reduced to 12.9%.

However, the rent-to-sales ratio of merchants is about 12.9%, up 0.8 percentage points year-on-year, reflecting the increase in rents. At the same time, tenant sales have increased significantly; the average monthly rent (per square foot) has increased by 12.8% to 62.4 yuan.

No intention to sell products in the Mainland

According to Xie Yucong, an analyst with Bank of Communications International, the property portfolio of the exhibition has always been defensive and low in volatility. When the market conditions are poor, the property portfolio can be kept steady. When the market conditions are good, although the retail sales are still growing, the increase will not be as high as jewelry and other luxury goods. Strong, it is expected that this year’s renewal rent adjustment rate will fall back to a reasonable level between 25% and 28%.

Zheng Huaiwu, an analyst at CIMB, believes that Hong Kong’s economy is strong and drives consumer growth. Even if the retail sales this year are less than 20% to 30% of high-end shopping malls, there is still a double-digit increase, which is similar to the overall market. It’s better than 8% last year.

At the end of last year, Lian Yalun, the Chairman of Nissan Capital Group, which sold 17 properties at the end of the exhibition, said that there was no plan to further sell assets. Instead, he focused on capital management such as repurchases to increase the distribution per unit. Wang Guolong added that the Group will focus on identifying potential mergers and acquisitions projects in first-tier cities in the Mainland and have no plans to expand second-tier cities.

In the coming months, it is planned to repurchase 80 million units

The Group expects to continue to repurchase up to 80 million fund units in the market conditions and regulations in the coming months to offset the impact of property sales on the distribution of fund units.

Xie Yucong said that the joint exhibition should address the reduction of rental income from the sale of assets and maintain the number of units per fund. Using the proceeds from sale of products as repurchase is one of the methods, but this does not mean that the Group will not acquire new projects. I believe management There are still a lot of bullets left at the level, but mergers and acquisitions need to look at opportunities, so buybacks will reach their targets faster.