Link Real Estate Investment Trust (HKG:823) shares fell 6.3% to HK$79.75 in the week since its latest half-year results. Link Real Estate Investment Trust reported in line with analyst predictions, delivering revenues of HK$5.3b and earnings per share of HK$3.14, suggesting the business is executing well and in line with its plan. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Taking into account the latest results, the latest consensus from Link Real Estate Investment Trust's 14 analysts is for revenues of HK$10.9b in 2020, which would reflect a satisfactory 4.2% improvement in sales compared to the last 12 months. Earnings per share are expected to plunge 64% to HK$3.08 in the same period. In the lead-up to this report, analysts had been modelling revenues of HK$10.9b and earnings per share (EPS) of HK$2.90 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of HK$92.07, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Link Real Estate Investment Trust analyst has a price target of HK$104 per share, while the most pessimistic values it at HK$73.31. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Link Real Estate Investment Trust's revenue growth will slow down substantially, with revenues next year expected to grow 4.2%, compared to a historical growth rate of 6.5% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.6% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Link Real Estate Investment Trust.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Link Real Estate Investment Trust's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Link Real Estate Investment Trust going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Link Real Estate Investment Trust's balance sheet, and whether we think Link Real Estate Investment Trust is carrying too much debt, for free on our platform here.
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