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Wednesday, November 24, 2021

EC World REIT Review @ 24 November 2021

Basic Profile & Key Statistics

EC World REIT (ECW) is a logistics REIT that owns 8 properties in China.

Performance Highlight

Performance improved YoY mainly due to the strengthening of RMB and positive straight-line adjustment. The DPU has increased YoY mainly due to higher NPI and lower retention ratio. In RMB terms, gross revenue is 0.9% higher while NPI is 0.9% lower.    

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 43.485%
  • REIT manager's shareholding is slightly high at 1.073%
  • Directors of REIT manager's shareholding is high at 43.867%

Lease Profile

  • Occupancy is high at 99%
  • All income is received in RMB
  • WALE is short at 2.8 years
  • Highest lease expiry within 5 years is high at 74.9% which falls in 2024
  • Weighted average land lease expiry is short at 36.25 years

Debt Profile

  • Gearing ratio is moderate at 37.9%
  • Cost of debt is high at 4%
  • Fixed rate debt % is low at 59.2%
  • All debts are secured debts
  • WADM is short at 0.88 years
  • Highest debt maturity within 5 years is high at 83.2% which falls in 2022
  • Interest coverage ratio is low at 2.9 times

Diversification Profile

  • Top geographical contribution is high at 98.2% 
  • Top property contribution is high at 27% 
  • Top 5 properties contribution is high at 87.5% 
  • Top tenant contribution is high at 36.4% 
  • Top 10 tenants contribution is high at 98.3%

Key Financial Metrics

  • Property yield is high at 6.7% 
  • Management fees over distribution is low at 11.1% in which unitholders receive S$ 9.01 for every dollar paid 
  • Distribution on capital is slightly low at 3.4%
  • Distribution margin is low at 40.4%

Trends

  • Flat - DPU, NAV per Unit, Property Yield
  • Downtrend - Interest Coverage Ratio, Distribution on Capital, Distribution Margin

Relative Valuation

  • P/NAV - Above +1SD for 1y; Above average for 3y and 5y
  • Dividend Yield - Below average for 1y; Below -1SD for 3y and 5y

Author's Opinion

FavorableLess Favorable
High REIT Sponsor's Shareholding All Income in RMB
High Directors of REIT Manager's ShareholdingShort WALE
High OccupancyConcentrated Lease Expiry
High Property YieldShort Weighted Average Land Lease Expiry
Competitive Management FeesHigh Cost of Debt
 Low Fixed Rate Debt %
 0% Unsecured Debt
 Short WADM
 Concentrated Debt Maturity
 Low Interest Coverage Ratio
 High Top Geographical Contribution
 High Top Property & Top 5 Properties Contributions
 High Top Tenant & Top 10 Tenants Contributions
 Low Distribution Margin
 Interest Coverage Ratio Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend
Despite slight performance improvement as compared to the previous quarter, the DPU based on distributable income has increased by 22.1% as compared to the previous quarter mainly due to the absence of withholding tax. For the potential transaction (which may or may not lead to the divestment of properties) with Forchn International Pte. Ltd., there is still no update at this moment. 

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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