Investment Rating - The report maintains a "Buy" rating for the company, with an updated target price of HKD 5.92, reflecting a potential upside of 22.8% from the current price of HKD 4.82 [1][2][3]. Core Insights - The company’s portfolio remains stable, and the anticipated interest rate cuts are expected to enhance its valuation. The target price has been slightly raised due to recent operational updates and market conditions [2][3]. - Despite a slight downward adjustment in revenue and distribution forecasts for 2025 and 2026 due to the ongoing stabilization of the Hong Kong retail market, the company is expected to benefit from improvements in the stock and real estate markets, leading to a wealth effect that could stabilize the market in the medium to long term [3]. - The company’s retail portfolio, primarily focused on essential consumption, is expected to maintain high occupancy rates. The fluctuations in HIBOR have recently impacted the stock price, but a potential interest rate cut by the Federal Reserve in September or at year-end is anticipated to support a rebound in the stock price [3]. Financial Overview - Revenue projections for the company are as follows: HKD 1,786 million in 2023, HKD 1,746 million in 2024, HKD 1,743 million in 2025, HKD 1,782 million in 2026, and HKD 1,815 million in 2027, with a year-on-year growth of approximately 2-3% expected for 2026 and 2027 [6][12]. - The net property income is projected to be HKD 1,299 million in 2023, decreasing to HKD 1,253 million in 2024, and then gradually increasing to HKD 1,314 million by 2027 [6][12]. - The company’s distribution per unit is expected to be HKD 0.404 in 2023, decreasing to HKD 0.357 in 2024, and then gradually increasing to HKD 0.382 by 2027, with a distribution yield of approximately 7.5% in 2025 [6][12].

Core Viewpoint - The report from CMB International maintains a target price of HKD 5.68 for Prosperity REIT (00778) and keeps a "Buy" rating, citing a decrease in interest expenses that is expected to lead to an increase in dividends for the year [1] Group 1: Financial Performance - Prosperity REIT's performance for the first half of 2025 is stable and largely in line with market expectations, with a slight year-on-year revenue decrease of 2% to HKD 854.5 million due to rental reductions on some assets [1] - The distributable income and distribution per unit (DPU) for the first half of 2025 increased by 2.1% and 1% year-on-year, respectively, aligning with expectations [2] Group 2: Rental and Occupancy Rates - The occupancy rate improved by 0.9 percentage points to a high level of 95% for the year, with 11 out of 17 shopping malls achieving occupancy rates above 96% [2] - The company plans to re-lease previously vacated spaces in the Prosperity Plaza, expecting further improvement in overall occupancy rates and rental recovery in the second half of the year [2] Group 3: Tenant Composition and Strategy - Approximately 72% of Prosperity REIT's tenant mix consists of essential services and daily necessities, which helps maintain resilience in the retail portfolio [2] - The company aims to optimize its tenant mix by introducing more specialty dining and new brands to mitigate the impact of pressured sectors, with expectations for overall rental stability in the second half of the year [2] Group 4: Interest Expense and Dividend Outlook - The company is expected to benefit from a decrease in HIBOR, which will help save on interest expenses for about 50% of its floating-rate debt, supporting an increase in DPU [2]