Link Real Estate Investment Trust (HKG:823) defied analyst predictions to release its interim results, which were ahead of market expectations. It was a solid earnings report, with revenues and earnings per share (EPS) both coming in strong. Revenues were 13% higher than analysts had forecast, at HK$5.3b, while EPS were HK$3.14 beating analyst models by 151%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the current consensus from Link Real Estate Investment Trust's 14 analysts is for revenues of HK$10.8b in 2020, which would reflect a modest 3.6% increase on its sales over the past 12 months. Earnings per share are forecast to plummet 65% to HK$2.96 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of HK$10.9b and earnings per share (EPS) of HK$2.90 in 2020. So the consensus seems to have become somewhat more optimistic on Link Real Estate Investment Trust's earnings potential following these results.
There's been no major changes to the consensus price target of HK$91.47, 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. There are some variant perceptions on Link Real Estate Investment Trust, with the most bullish analyst valuing it at HK$104 and the most bearish at HK$73.31 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Link Real Estate Investment Trust's revenue growth is expected to slow, with forecast 3.6% increase next year well below the historical 6.5%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.0% per 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. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Link Real Estate Investment Trust's revenues are expected to 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Link Real Estate Investment Trust going out to 2022, and you can see them free on our platform here..
You can also see whether Link Real Estate Investment Trust is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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