Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Another Weak Set Of Metrics: Link REIT (823.HK) [Link REIT] reported negative FY 1H21 bottom-line results of HKD 4.1 bn. While still a loss, this figure represents about 17.2% of losses (HKD 23.9 bn) posted in FY 2H20. Losses in both periods were attributed to negative fair value marks of HKD 7.3 bn and HKD 27.6 bn, respectively. While results on an operating basis were positive, the trend unfortunately remains negative for Link REIT – declining HKD 564 mn (15.1%). The poor operating results were driven by weaker Hong Kong rental income which declined HKD 186 mn (5.4%) HOH; and a HKD 55 mn (9.8%) decline in mainland Chinese property-related revenues;*Worries Abound: Weaker than expected Hong Kong retail operations leading to lower level of rental reversions; and continued negative revaluation of property due to lower rents and/or higher cap rates remain long-term risks; and*Poor Capital Management: On July 26, 2020, Link announced its proposed acquisition of a Grade A office building, The Cabot at 25 Cabot Square at Canary Wharf in London. This transaction makes little sense for Link REIT on a number of levels. Management also reiterated its 2025 target, suggesting that intends to add to the existing "core" portfolio while adding "core-plus" and "value-add" assets, which would include mainland Chinese Tier-1 cities, the United Kingdom, Australia, Singapore and Japan. Link REIT has also completed the 60 mn share buyback. Instead of weighing a buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend its shares against short-selling.

*Another Weak Set Of Metrics: Link REIT (823.HK) [Link REIT] reported negative FY 1H21 bottom-line results of HKD 4.1 bn. While still a loss, this figure represents about 17.2% of losses (HKD 23.9 bn) posted in FY 2H20. Losses in both periods were attributed to negative fair value marks of HKD 7.3 bn and HKD 27.6 bn, respectively. While results on an operating basis were positive, the trend unfortunately remains negative for Link REIT – declining HKD 564 mn (15.1%). The poor operating results were driven by weaker Hong Kong rental income which declined HKD 186 mn (5.4%) HOH; and a HKD 55 mn (9.8%) decline in mainland Chinese property-related revenues;*Worries Abound: Weaker than expected Hong Kong retail operations leading to lower level of rental reversions; and continued negative revaluation of property due to lower rents and/or higher cap rates remain long-term risks; and*Poor Capital Management: On July 26, 2020, Link announced its proposed acquisition of a Grade A office building, The Cabot at 25 Cabot Square at Canary Wharf in London. This transaction makes little sense for Link REIT on a number of levels. Management also reiterated its 2025 target, suggesting that intends to add to the existing "core" portfolio while adding "core-plus" and "value-add" assets, which would include mainland Chinese Tier-1 cities, the United Kingdom, Australia, Singapore and Japan. Link REIT has also completed the 60 mn share buyback. Instead of weighing a buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend its shares against short-selling.

Link REIT

Link REIT – Bread and Butter Melting