Fortune REIT

Fortune REIT: 3Q14 DPU rose 24.4% to HK10.30¢, while distributable income rose 25.9% to HK$193.1m, while revenue increased 32% to HK$416.6m and NPI increased 33% to 286.6m, from additional contribution from Fortune Kingswood and strong rental growth (+24.6 ytd) across the portfolio. Excluding Belvedere Square which is undergoing AEI, occupancy stood at robust 99.1%. Passing rents were up 8.5% to HK$35.7/psf. Aggregate leverage of 31.2%. Belvedere Square AEI of HK$80m commenced in Sep, and is expected to complete throughout phases in 2015. Meanwhile, Fortune Kingswood’s growth still presents an attractive profile, as spot rents are still 30% below that in nearby Link REIT mall. Management highlights that Fortune is buffered from the Occupy Central saga, as 60% of its tenants cater to non-discretionary spending, which are more defensive, and not affected the tourism slack. That said, rising wages and energy costs remains a pressure. BVPS of HK$10.99 translates to P/B of 0.66x, while annualized 3Q14 yield is 5.7%