SINGAPORE (Dec 6): EC World REIT currently has seven assets in China under its belt, totalling $1.33 billion as at end-3Q18 and spreads over 757,173 sqm of net lettable area (NLA). Its largest asset by value is the Chongxian Port Investment, accounting for 33% of portfolio AUM and 46.8% of 9M19 net property income.
In terms of asset value by trade sector, about 47.6% of the REIT’s portfolio value is derived from port logistics, 30.5% from e-commerce and 21.9% from specialised logistics.
In addition, as at 3Q18, 37.8% of portfolio gross rental income and 35% of leasable area comprised e-commerce assets, making ECW uniquely exposed to the e-commerce sector in China.
With this, the REIT has caught the attention of CGS-CIMB. In an unrated report by analyst Lock Mun Yee on Thursday, she also notes that the REIT has a high portfolio occupancy of 99.2%.
Three of the REIT’s assets – Stage 1 Beigang Logistics, Chongxian Port Investment and Fu Heng – are currently master leased to subsidiaries of Forchn Group Holdings, while the remaining four properties – Hengde, Fuchou Industrial, Wuhan Mei Luo Te and Chongxian Port Logistics – are multi-tenanted.
Forchn Holdings, the REIT’s sponsor, is a diversified enterprise group involved in the real estate, e-commerce, logistics, finance and health & wellness sectors. As at Mar 2018, it holds a 44.28% stake in EC World REIT.
“According to the company, all of its properties except Wuhan Mei Luo Te have inbuilt rental escalations [of 1-4%] in their rental structures until 2020-21 or 2029, giving the REIT visible earnings growth,” says Lock.
The management also indicated that Wuhan Mei Luo Te is under-rented.
To recap, the REIT announced its 3Q18 earnings on Nov 7, which saw its DPU increase by 9% to 1.57 cents from 1.44 cents a year ago.
See: EC World REIT posts 9% increase in 3Q DPU to 1.57 cents
Based on the annualised 9M18 DPU of 4.609 cents, ECW is trading at 8.9% yield. The stock is also trading at 0.8 times 9M18 P/BV. This represents a 5.42% spread over China’s 10-year government bond yield of 3.38% and 6.4% over the Singapore government bond yield of 2.39%.
As at 2.30pm, units in EC World REIT are trading at 69 cents.
