“As we do not anticipate any further rent rebates arising from the COVID-19 pandemic too, the return to full income distribution and potentially the return of some of the earlier retained income will be a positive surprise to FY21 DPU,” they share in a Feb 24 broker’s report. The counter’s 0.8 P/NAV ratio suggests that this strong yield is available at a bargain.
In terms of providing strong dividends at low prices, S-REITs are proving themselves to be the gift that keeps on giving. Despite offering lower DPU in FY2020 ending September due to rental rebates and retention of 10% distributional income, EC World REIT is currently offering an 8.3% forward dividend yield at a P/NAV multiple of just 0.8 times in FY2021.
To be sure, EC World REIT has erred on the side of prudence by retaining 10% of distributable income in the face of the Covid-19 threat. But Dale Lai and Derek Tan of DBS Group Research believe that the REIT’s payout ratio for FY2021 will come in at 95% as it continues to retain distributional income till at least 2HFY2021. They have maintained a “buy” call on the counter for a target price of $0.80.
