Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HKD 3.84, indicating a potential upside of 25.5% from the current price of HKD 3.06 [1][2]. Core Insights - The company's performance in the first half of 2025 met expectations, with a revenue increase of 1.2% year-on-year to HKD 224.59 million and a net property income rise of 3.43% to HKD 185.56 million [6][7]. - The distribution per unit (DPU) for the first half of 2025 was HKD 0.131, a decrease of 10.9% year-on-year, but a slight increase of 3.2% quarter-on-quarter [6][7]. - The overall occupancy rate of the company's properties remained high at 97.5% as of June 2025, with four properties maintaining occupancy rates above 95% [6][8]. - The company anticipates stable performance in 2025, with uncertainties primarily in 2026 due to potential rental adjustments following lease renewals with SF Holding [6][8]. - Financial costs are expected to decrease, which may alleviate downward pressure on rents in 2026, as the average borrowing cost fell to 3.95% [6][8]. Financial Overview - Revenue projections for 2025 are estimated at HKD 458 million, with a slight growth of 2.7% year-on-year, while net property income is expected to reach HKD 368 million [5][12]. - The company plans to maintain a distribution payout ratio of 90% for the year, with expected DPU adjustments reflecting current rental levels [6][12]. - The total debt as of mid-2025 was approximately HKD 24.78 billion, a slight decrease from HKD 25.05 billion at the end of 2024 [6][12]. Performance Metrics - The company’s market capitalization is approximately HKD 2,481.32 million, with a year-to-date change of -2.24% [4]. - The 52-week high and low for the stock are HKD 3.26 and HKD 2.56, respectively [4]. - The average daily trading volume is around 0.95 million shares [4].

Summary of Conference Call Records Industry Overview - The logistics real estate market in China is experiencing a significant transformation, with a national high-standard warehouse vacancy rate nearing 18%, showing a downward trend. The average effective rent has slightly decreased to 21.6 yuan per square meter [1][2][3]. Key Points Market Dynamics - The total stock of high-standard warehouses reached 172 million square meters in Q2 2023, marking a nearly 2% quarter-over-quarter increase. Since December 2019, the stock has increased by nearly 100 million square meters [2]. - Major provinces for high-standard warehouse stock are Jiangsu, Guangdong, and Zhejiang, with Suzhou leading at 14 million square meters [1][2]. - New supply in Q2 2023 was concentrated in cities like Foshan, Guangzhou, Wuxi, Beijing, and Suqian, leading to a temporary imbalance in supply and demand, causing rents to decline in some areas [4]. Rental Trends - In cities with high occupancy rates, rents have bottomed out and are showing slight recovery. Cities like Shanghai, Dongguan, Guangzhou, and Beijing maintain rents above 30 yuan per square meter [4]. - The average rent in the logistics real estate market is experiencing a downward trend, despite improvements in occupancy rates over the past three quarters [31]. Demand Drivers - The primary demand for logistics real estate comes from e-commerce, third-party logistics, and express delivery sectors. During the 618 shopping festival, there was a notable increase in demand for temporary and external warehouses from platform companies [5][8]. - The home appliance industry and large supply chain companies are expanding warehouse space due to national subsidy policies, which continue to drive demand [5][7]. Future Supply Outlook - An estimated 10 million square meters of new supply is expected in the second half of 2025, with 13 million square meters in 2026, primarily in Guangdong, Beijing, and Shanghai [3][11]. - The overall supply is expected to decrease as the focus shifts towards stock integration and transactions, following a slowdown in project development over the past two years [11][30]. Regional Insights - The South China region is seeing significant integration in cross-border e-commerce warehouse layouts, with e-commerce platform leasing area share increasing from 7.6% in Q2 2024 to 30.9% in Q2 2025 [6][7]. - The Yangtze River Delta region has the largest stock of high-standard warehouses at approximately 60 million square meters, with a control rate of about 25% and average rent around 25 yuan per square meter [14][19]. Impact of External Factors - Changes in U.S. policies have led to increased direct mail costs, affecting user activity for companies like Shein and Temu, with declines of 25% and 50% respectively [3][9]. - Meituan's business adjustments have led to some warehouse de-leasing, but the overall impact on the market is limited due to continued demand from other segments [10]. Market Health Indicators - The health of the market cannot be judged by a fixed vacancy rate due to significant differences in stock bases across cities. For instance, a 10% vacancy rate in Beijing equates to 300,000 square meters, while the same rate in Tianjin represents 1 million square meters [34]. Conclusion - The logistics real estate market is adapting to changing demands and external pressures, with a focus on e-commerce and supply chain dynamics. Future supply will be closely monitored as the market continues to evolve, particularly in key regions like South China and the Yangtze River Delta.