SINGAPORE (Aug 8): EC World REIT (ECW) reported 2Q18 results that came within expectations of research house SooChow CSSD Capital Markets (Asia).
To recap, ECW’s 2Q18 revenue rose 7.6% y-o-y to $24.9 million while NPI rose 8.2% y-o-y to $22.8 million, driven by contribution from maiden acquisition Wuhan Meiluote.
Distribution income came in 3.1% higher at $12.4 million while DPU of 1.57 cents was 1.9% higher as 1Q18 results incurred withholding tax expenses from cash repatriation.
As of 2Q18, portfolio occupancy is firm at 96.7% with committed occupancy at 99.2%. Gearing stands at 29.5%, leaving ample debt headroom for acquisitions.
While SooChow believes there may have been market concerns on tight acquisition yield of Wuhan Meiluote at 4.9%, the research house has previously highlighted upside to the asset post-stabilisation.
Expansion of existing tenant JD.com took up 2,900 sqm more space, bringing occupancy to 88.2% from 82.2% at acquisition and illustrating strong tenant covenants.
SooChow says ECW possess the potential of bridging the gap to its e-commerce REIT positioning with a visible acquisition roadmap. While Fu Zhou e-commerce ROFR asset under sponsor Forchn Holdings has started operations in the near term, partnership with YCH in the longer term could bring potential pipeline assets for acquisition consideration.
“ECW offers attractive FY19E yield of 9.14% and currently trades at undemanding 0.79 times book. Maintain ‘buy’ with target 88 cents/unit,” says analyst Tan Cheng Wee in a Wednesday report.
As at 4.07pm, units in ECW are up 0.5 cent at 72 cents.
