Dialogue with Listed Company - Fortune REIT (778.HK) - UTRADE brought to you by UOB Kay Hian

Fortune REIT is a real estate investment trust established in 2003 and is the first REIT to hold assets in Hong Kong. It comprises 3.0 million square feet of retail space and 2,793 car parking spaces in 17 retail assets, with 16 private housing estate retail properties in Hong Kong and 1 neighbourhood mall in Singapore. Furthermore, by understanding the latest development of the company, one of the largest REITs in Hong Kong, we can also learn about the latest trends in local retail and consumption.

Competitive Advantages	Quality Property Portfolio Fortune REIT has a high-quality Hong Kong-focused neighbourhood mall portfolio. It owns 16 properties in large private residential developments which connecting railway stations or large bus terminals in Hung Hom, Shatin, Ma On Shan and Tiu Keng Leng, etc. The catchment population consists of young families, students and workers in the areas. This provides a steady flow of people with consumption power, granting the company a good market position. Stable and Diversified Tenants Mix Fortune REIT's tenants are mainly livelihood-related and cover a wide range of categories. The retail market in Hong Kong faces a slow recovery amid structural changes. Total retail sales value for the 6M24 saw a 6.6% yoy. Nevertheless, the company's tenants, including fast food, tutorial centres, services and wet market, showed resilience and registered a mild increase in rents upon renewal. Overall, it retained 83% of their tenants in 1H24, indicating a stable leasing demand. As of 30 June 2024, the occupancy rate increased to 94.8% from 94.9% at the end of 2023. Health Financial Condition and Payout Fortune REIT's balance sheet remained sound and robust. As of 30 June 2024, the gearing ratio remained steady at only 24.8%, while gross liability as a percentage of gross assets was only 29.3%. Facing the rising interest risk in recent years, 55% of its total debt has been well hedged to fixed rates. With a distribution payout ratio of 100% for 1H24, the interim DPU was HK$0.1823, which implied an attractive annualized yield of more than 9%.
Strategic Plan	Looking ahead, Fortune REIT aims to continue to sustain the competitive edge of its portfolio through strategic repositioning and Asset Enhancement Initiatives (AEIs), ensuring that they are primed to capture any opportunities that arise within the rapidly evolving retail landscape. For example, the HK$300m asset enhancement initiatives for +WOO Phase 2 were essentially completed in July 2024. During the 1H24, they secured over 22,500 sq. ft of leases for the renovated area, pushing the overall occupancy rate of +WOO to 93.4% as of 30 June 2024. The tenant mix now features a heightened focus on lifestyle and entertainment, highlighted by the addition of a gym alongside the existing cinema and playhouses. The food and beverage offerings have also expanded, with the addition of several popular dining spots occupying a larger area. As they continue to lease out the remaining space of the renovated area, the overall occupancy of +WOO will see a further increase in the 2H24.
Market Capitalization	Around HKD 8.2 billion (as of 18 November 2024)