Analysts will be combing through Hongkong Land's first-half results on Tuesday for signs of a slowdown in the rate of decline in rentals that could point to a potential rebound in the office market. Merrill Lynch forecasts Central's biggest landlord will report a 3 per cent fall in earnings to US$77 million, with net rental income down 6 per cent to US$135 million. 'We expect this set of results will highlight signs of stabilisation,' says lead analyst Louisa Fok in a research report released last week. She emphasised the results should show that rentals have only declined 3 per cent when compared to the previous six months. Merrill Lynch expects Hongkong Land to revalue its holdings on the basis of an improved office rental outlook, similar to the 4 per cent upward revision in the second half of last year. The brokerage forecasts occupancy rates from December averaged 95 per cent, a gain of two percentage points owing to robust demand for relocations and upgrading. Grade A office vacancies have fallen to 9.8 per cent, down from 11.2 per cent in December. Ms Fok says the dividend is expected to remain unchanged at 2 US cents per share, assuming the company distributes 100 per cent of its operating cash flow. 'Hongkong Land should be the prime beneficiary to the recovering office market given its sizeable exposure in the core Central area,' Ms Fok wrote. 'In addition we expect NAV (net asset value) upgrades should continue in the next 18 months and this should drive share-price performance.' The brokerage has a 'buy' recommendation on the share with a 12-month price target of US$2.08, up from US$1.81 at the time the report was issued. This year's dividend is forecast to yield 3.3 per cent.