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EC World REIT’s Potential Growth Ahead

Key Highlights:

  • EC World REIT (SGX: BWCU)'s 3Q19 dropped 5.2%

  • The annualised yield and price to book ratio are 8% and 0.88 respectively

1. Dividends

Net property income grew 3.2% to $22.9m. This was mainly due to the acquisition of Fuzhou E-Commerce in Aug and also the rental escalation at other properties.

However, the distributable income dropped 4.4%, which was due to

  • a deferred credit charge of $3.5m arising from timing mismatch between loan drawdown

  • FX loss of $1.5m

The annualised yield is 8%.

2. Portfolio

The portfolio leverage is currently at the healthy side of 39.6%. The interest cost is at 4.6%,

It is currently trading at a price to book ratio of 0.88.

3. Growth Catalyst

Despite the poor quarterly results, The REIT management is still positive on the outlook due to

  1. China government's initiatives to boost domestic consumptio including the expansion of cross-border e-commerce import business to more cities, increased innovation in design and production of consumer goods and enhancement to existing pedestrian streets to generate shopper traffic.

  2. In Hangzhou, retail sales grew 9%, with online retail sales maintaining its rapid growth trajectory of 22.7%. This could be a key growth factors for its Hangzhou properties.

  3. The REIT reiterates that retail growth remains strong in China as majority of its tenants are primarily engaged in domestic business which is unlikely to be impacted by the US-China trade war.

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