Wharf REIC's 2022 Core Profit Falls Short, but We Raise FVE on Improving Outlook

We raise our fair value estimate for Wharf REIC to HKD 49.50 from HKD 46.00 as we factor in a stronger recovery in its retail property and hotel operations. We also assume further improvement in operating margins on the normalization of marketing expenses and the phased exit from the low-margin property development business. We forecast 2023 dividend per share to increase 6.9% year on year to HKD 1.40, implying a 3.2% dividend yield based on the closing price as of March 7. While we think Wharf REIC is one of the key beneficiaries of Hong Kong’s border reopening, we think its current share price already reflects part of the upside. As such, we believe Link REIT may be more attractive for investors looking for exposure to the retail landlords in Hong Kong.