Fortune REIT started FY15 on a positive note, recording a 13.6% YoY increase in revenue to HK$458.8m and a 12.0% growth in its DPU to 11.63 HK cents for its 1Q15 results. This was within our expectations, as revenue and DPU constituted 25.3% and 25.6% of our full-year forecasts, respectively. Growth was driven by solid rental reversions of 18.4% and contribution from Laguna Plaza, which was acquired in Jan 2015.

Overall portfolio occupancy stood at a healthy 98.1%, as at 31 Mar 15; while passing rent was HK$37 psf per month, which compares favourably against the HK$36.4 psf per month registered in 4Q14. In terms of financial position, Fortune REIT’s gearing was 33.2%, and 46% of its debt has been hedged through interest rate swaps and caps. We will provide more details after speaking with the company. For now, we maintain our HOLD rating and HK$8.05 fair value estimate on Fortune REIT.

Source: OCBC Research - 11 May 2015