EC World REIT Review @ 22 August 2021

Basic Profile & Key Statistics

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

Performance Highlight

Gross revenue and NPI increased mainly due to positive straight-line adjustment and strengthening of RMB, however, the actual quarter distributable income has decreased YoY. ECW has released part of the retention in this quarter. 

Related Parties Shareholding

• REIT sponsor's shareholding is high at 43.53%
• REIT manager's shareholding is moderate at 0.98%
• Directors of REIT manager's shareholding is high at 43.81%

Lease Profile

• Occupancy is high at 99.1%
• All income is received in RMB
• WALE is short at 3 years
• Highest lease expiry within 5 years is high at 74.9% which falls in 2024
• Weighted average land lease expiry is short at 36.5 years

Debt Profile

• Gearing ratio is moderate at 37.6%
• Cost of debt is high at 4.2%
• Fixed rate debt % is low at 58.9%
• All debts are secured debts
• WADM is short at 1.13 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 98.3% 
• Top property contribution is high at 27.1% 
• 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 6.6% 
• Management fees over distribution is low at 11.2% in which unitholders receive S$ 8.93 for every dollar paid 
• Distribution on capital is slightly low at 3.3%
• Distribution margin is low at 39.5%

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 and 5y; Above average for 3y
• Dividend Yield - Below -1SD for 1y, 3y and 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	All Income in RMB
High Directors of REIT Manager's Shareholding	Short WALE
High Occupancy	Concentrated Lease Expiry
High Property Yield	Short Weighted Average Land Lease Expiry
Competitive Management Fees	High 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

Compared to the previous quarter, the actual distributable income has decreased, but the DPU is the same as the previous quarter due to the release of partial retention. As ECW previously indicated that retention is for working capital use, it is unclear what the retention amount is left. As for the potential transaction (which may or may not lead to the divestment of properties) with Forchn International Pte. Ltd., there is no update at this moment. 

Join REIT-TIREMENT Patreon for patron-exclusive posts that cover REITs valuation and more detail on fundamental analysis. You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*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.