Goldman Sachs: Upgrades WHARF REIC (01997) rating to "Neutral," with revised payout ratio driving reevaluation.

Goldman Sachs released a research report stating that WHARF REIC (01997)'s interim results reflect a significant shift in management's capital allocation strategy. The dividend payout ratio has been raised from 65% to 90%, and the forecast for the dividend per share for the fiscal year 2026 is projected to increase by 43% year-on-year to HKD 1.89, which corresponds to an approximately 5.8% dividend yield, similar to LINK REIT (00823)'s 6.4%, and higher than most peers. The firm upgraded WHARF REIC's rating from "Sell" to "Neutral," raising the target price from HKD 28 to HKD 36, which reflects about a 40% discount to the projected net asset value per share for the fiscal year 2026. Goldman Sachs believes that although its Times Square faces competitive pressure and the structural challenges in rental income still need to be addressed, the increase in the dividend yield to 5.8% may drive a reevaluation of its valuation, leading to an upward adjustment of WHARF REICs forecast for basic earnings per share from 2026 to 2028 by between 0% and 15%.