Q&ACategory: Dividend StocksLink REIT – value trap or bargain buy?
Daniel Lin asked 11 months ago
Is it worth discussing and understanding why Link REIT's share price has fallen to 2016 levels? Based on the common metrics of evaluation, Link REIT has a consistent DPU growth trend, is the largest REIT in Hong Kong, and the majority of its portfolio is also based in HK, which means it has only a small exposure to China. At current prices it is yielding almost 7%.  My guess is that since 2019 it's price has suffered from the demonstrations in Hongkong. Just as when the demonstrations were quelled, Hongkong went into a COVID lockdown, and the fed began hiking interest rates to an all time high. It seems like the REIT has had to endure a lot of challanges over the last few years. Morningstar also downgraded Link REIT recently and its CEO also sold a quarter of his holdings, which led to a bout of frenzied selling, and brought its share price to below $44, which was the rights issue price. I bought Link REIT at an average price of $58 - should I hold out and average down at its current price of $37.50, or cut losses? Has it become a value trap or is it currently a bargain buy?
1 Answers
Rusmin Ang Staff answered 11 months ago
HI Daniel,   You summed up pretty well on Link REIT. With the opening of HK economy, it can only get better for Link REIT but we can't ignore the big elephant in the room and that's the rising cost of debt. Link has taken Rights exercise to reduce the pressure coming from this end but at the expense of DPU dilution. With the recent real estate problem in China, Link REIT got sold down together with all the real estate developers in China. For now, I guess the link REIT shareholders can only wait the situation being play out while they continue to received diluted DPU. The yield is actually closer to 6% if we take into account of 20% dilution. 
Daniel Lin replied 11 months ago

Thank you Rusmin. Appreciate it.