SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

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Equity Bottom-Up

Keppel Pacific Oak US REIT / Equity Bottom-Up

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    <div class='content-caption'>Up for the year</div>
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<p>ELEVEN smaller cap Reits in the iEdge S-Reit Index with market capitalisation under S$1 billion have all generated positive returns in Q1 2021. The 11 Reits posted 14.0 per cent total returns in the year-to-date (YTD) through to April 8, outperforming the index's 2.4 per cent total returns.</p>

<p>The top five best performing smaller cap Reits of the index in the YTD through to April 8 are: ARA Logos Logistics Trust (25.6 per cent), Sabana Shari'ah Compliant Reit (23.9 per cent), ARA US Hospitality Trust (22.2 per cent), First Reit and Lippo Malls Indonesia Retail Trust (both 16.9 per cent).</p>

<p>These five were also among the six best performing Reits in the overall iEdge S-Reit index, with Starhill Global Reit (market cap of S$1.3 billion) coming in fourth at 16.9 per cent total returns.</p>

<p>In terms of price-to-book ratios, the 11 smaller cap Reits trade at an average 0.86 times, while the index trades closer to 1.05 times.<br><br>
ARA Logos Logistics Trust (ALOG) has a portfolio of 27 logistics warehouses in Singapore and Australia valued at S$1.28 billion. In its recently published annual report, the Reit attributes its growth in 2020 to its new sponsor, Logos, which owns logistics spaces across the Asia-Pacific. ALOG's portfolio remained resilient and delivered a 3.4 per cent and 4.8 per cent growth in FY2020 gross revenue and net property income, respectively. The Reit also inked new leases and achieved positive rental reversion of 4.8 per cent in the financial year and has a gearing ratio of 39.0 per cent.<br><br>
Sabana Reit's portfolio has 18 Singapore properties across high-tech industrial, warehouse and logistics, chemical warehouse and logistics, and general industrial sectors with a total value of S$0.9 billion. In its FY2020 results, the Reit reported 2.29 cents for its H2 2020 distribution per unit (DPU), a 47.7 per cent increase year-on-year, bringing its full year DPU to 2.76 cents. Amid a challenging 2020, the Reit achieved positive rental reversion of 0.9 per cent and maintains a gearing ratio of 33.5 per cent. On March 10, the Reit announced that its NTP+ Mall at New Tech Park has received temporary occupancy permit and is set to open in Q2 2021.</p>

<p>ARA US Hospitality Trust (ARA H-Trust) is a stapled security with a portfolio of 41 upscale select-service hotels across 22 states in the United States operating under the Marriott and Hyatt brands. The trust notes in its latest annual report that despite having recorded a net property loss of US$5.0 million and nil distributable income in FY2020, all 41 hotels have since reopened in July 2020 and the trust has generated positive cash flows from operations for FY2020. ARA H-Trust remains confident in the long-term fundamentals of the US hospitality market. Its properties are oriented towards domestic transient leisure and business travellers and is less reliant on group and international demand.</p>

<p>SPH Reit, first to kick off the current reporting season for S-Reits, announced an improvement across its portfolio of retail malls. Gross revenue increased 4.9 per cent year-on-year and Q2 FY2021 DPU was issued at 1.24 cents, a 3.3 per cent increase quarter-on-quarter. SPH Reit noted that tenant sales at its Singapore malls have shown signs of recovery, following the phased lifting of safe distancing measures.</p>

<p>Frasers Logistics &amp; Commercial Trust (FLCT) has announced that it will join the Straits Times Index (STI) on April 13. FLCT will replace Jardine Strategic on the STI following Jardine Matheson's announcement on March 8 to simplify the parent company structure and acquire Jardine Strategic.<br><br><strong><em>REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/s-reits-under-s1b-lead-sector-in-q1-2021">read</a> the original version.</em></strong></p>
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    Up for the year


ELEVEN smaller cap Reits in the iEdge S-Reit Index with market capitalisation under S$1 billion have all generated positive returns in Q1 2021. The 11 Reits posted 14.0 per cent total returns in the year-to-date (YTD) through to April 8, outperforming the index's 2.4 per cent total returns.

The top five best performing smaller cap Reits of the index in the YTD through to April 8 are: ARA Logos Logistics Trust (25.6 per cent), Sabana Shari'ah Compliant Reit (23.9 per cent), ARA US Hospitality Trust (22.2 per cent), First Reit and Lippo Malls Indonesia Retail Trust (both 16.9 per cent).

These five were also among the six best performing Reits in the overall iEdge S-Reit index, with Starhill Global Reit (market cap of S$1.3 billion) coming in fourth at 16.9 per cent total returns.

In terms of price-to-book ratios, the 11 smaller cap Reits trade at an average 0.86 times, while the index trades closer to 1.05 times.  
ARA Logos Logistics Trust (ALOG) has a portfolio of 27 logistics warehouses in Singapore and Australia valued at S$1.28 billion. In its recently published annual report, the Reit attributes its growth in 2020 to its new sponsor, Logos, which owns logistics spaces across the Asia-Pacific. ALOG's portfolio remained resilient and delivered a 3.4 per cent and 4.8 per cent growth in FY2020 gross revenue and net property income, respectively. The Reit also inked new leases and achieved positive rental reversion of 4.8 per cent in the financial year and has a gearing ratio of 39.0 per cent.  
Sabana Reit's portfolio has 18 Singapore properties across high-tech industrial, warehouse and logistics, chemical warehouse and logistics, and general industrial sectors with a total value of S$0.9 billion. In its FY2020 results, the Reit reported 2.29 cents for its H2 2020 distribution per unit (DPU), a 47.7 per cent increase year-on-year, bringing its full year DPU to 2.76 cents. Amid a challenging 2020, the Reit achieved positive rental reversion of 0.9 per cent and maintains a gearing ratio of 33.5 per cent. On March 10, the Reit announced that its NTP+ Mall at New Tech Park has received temporary occupancy permit and is set to open in Q2 2021.

ARA US Hospitality Trust (ARA H-Trust) is a stapled security with a portfolio of 41 upscale select-service hotels across 22 states in the United States operating under the Marriott and Hyatt brands. The trust notes in its latest annual report that despite having recorded a net property loss of US$5.0 million and nil distributable income in FY2020, all 41 hotels have since reopened in July 2020 and the trust has generated positive cash flows from operations for FY2020. ARA H-Trust remains confident in the long-term fundamentals of the US hospitality market. Its properties are oriented towards domestic transient leisure and business travellers and is less reliant on group and international demand.

SPH Reit, first to kick off the current reporting season for S-Reits, announced an improvement across its portfolio of retail malls. Gross revenue increased 4.9 per cent year-on-year and Q2 FY2021 DPU was issued at 1.24 cents, a 3.3 per cent increase quarter-on-quarter. SPH Reit noted that tenant sales at its Singapore malls have shown signs of recovery, following the phased lifting of safe distancing measures.

Frasers Logistics &amp; Commercial Trust (FLCT) has announced that it will join the Straits Times Index (STI) on April 13. FLCT will replace Jardine Strategic on the STI following Jardine Matheson's announcement on March 8 to simplify the parent company structure and acquire Jardine Strategic.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits under S$1b lead sector in Q1 2021

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<p>RESULTS UPDATE</p>
<div>
<h2>EC WORLD REIT</h2>
<div>
<h3>Enhanced income visibility and stability</h3>
<div>
<ul>
<li><strong>Maintain OUTPERFORM with slightly higher TP of S$0.74.</strong> Revenue and NPI for 3Q20 outperformed slightly, making up about 80% of our full year forecasts. Management continues to be prudent and retained 9% of income available for distribution. 3Q20 DPU of 1.388 Sing cents represents an annualised yield of 7.7%.</li>
<li><strong>Major new leases and lease renewals improves income visibility and stability</strong>. In the last quarter, ECW has managed to renew a major lease for its Specialised Logistics asset, as well as securing a new lease for 22,545 sqm (representing approximately 46.1% of occupancy) at Wuhan Meiluote, an e-commerce logistics asset. These leases, coupled with pre-determined yearly rental escalations for its master-leased assets, provide much needed stability for investors.</li>
<li><strong>No acquisitions in the near term until global Covid-19 situation improves.</strong> Management has expressed dedication to carefully monitoring the pandemic and ensuring stability of its revenues and distributions above all else. ECW’s current gearing ratio stands at about 38%, well below MAS’s limit of 50%.</li>
</ul>
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<p><strong>3Q20 financial review.</strong> In SGD terms, gross revenue and NPI is S$2.8 million and S$3.2 million higher in 3QFY20 compared to 3QFY19. In RMB terms, gross revenue and NPI were 9.2% and 12.3% higher respectively. This was mainly due to the contribution from Fuzhou E-commerce which was acquired in August 2019, and organic rental escalations.</p>
<p>Management has continued to retain a small portion of distributable income, given the highly uncertain and fluid pandemic that continues to plague globally. As of 3Q20, the total amount retained stands at about S$2.8mn (1H20: S$1.72mn), which we think will likely be redistributed to unitholders by the end of 2021 at the latest, barring any unforeseen circumstances.</p>
<p><strong>Lease renewals</strong>. A major lease renewal in 3Q20 relates to China state-owned enterprise China Tobacco Zhejiang Industrial Co., Ltd for ECW’s Specialised Logistics asset, Hengde Logistics. Hengde Logistics is a specially customised environment-control warehouse space, and as such, the uncertainty of non-renewal by the lessee remained an overhang on ECW’s share price for the last three quarters. China Tobacco has since renewed their lease amounting to 159,752 sqm, for a committed lease term of 38 months. The new rental rates represent a 1.1% increase over the expiring rental rates, however we note that ECW’s warehouse management services that have been provided to China Tobacco will no longer be required for the renewal lease term due to their internal restructuring. The termination of the warehouse management services will reduce ECW’s total revenue by about 1.1% (annualised based on 2Q20 gross revenue)</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
RESULTS UPDATE

EC WORLD REIT

Enhanced income visibility and stability


Maintain OUTPERFORM with slightly higher TP of S$0.74. Revenue and NPI for 3Q20 outperformed slightly, making up about 80% of our full year forecasts. Management continues to be prudent and retained 9% of income available for distribution. 3Q20 DPU of 1.388 Sing cents represents an annualised yield of 7.7%.
Major new leases and lease renewals improves income visibility and stability. In the last quarter, ECW has managed to renew a major lease for its Specialised Logistics asset, as well as securing a new lease for 22,545 sqm (representing approximately 46.1% of occupancy) at Wuhan Meiluote, an e-commerce logistics asset. These leases, coupled with pre-determined yearly rental escalations for its master-leased assets, provide much needed stability for investors.
No acquisitions in the near term until global Covid-19 situation improves. Management has expressed dedication to carefully monitoring the pandemic and ensuring stability of its revenues and distributions above all else. ECW’s current gearing ratio stands at about 38%, well below MAS’s limit of 50%.


3Q20 financial review. In SGD terms, gross revenue and NPI is S$2.8 million and S$3.2 million higher in 3QFY20 compared to 3QFY19. In RMB terms, gross revenue and NPI were 9.2% and 12.3% higher respectively. This was mainly due to the contribution from Fuzhou E-commerce which was acquired in August 2019, and organic rental escalations.
Management has continued to retain a small portion of distributable income, given the highly uncertain and fluid pandemic that continues to plague globally. As of 3Q20, the total amount retained stands at about S$2.8mn (1H20: S$1.72mn), which we think will likely be redistributed to unitholders by the end of 2021 at the latest, barring any unforeseen circumstances.
Lease renewals. A major lease renewal in 3Q20 relates to China state-owned enterprise China Tobacco Zhejiang Industrial Co., Ltd for ECW’s Specialised Logistics asset, Hengde Logistics. Hengde Logistics is a specially customised environment-control warehouse space, and as such, the uncertainty of non-renewal by the lessee remained an overhang on ECW’s share price for the last three quarters. China Tobacco has since renewed their lease amounting to 159,752 sqm, for a committed lease term of 38 months. The new rental rates represent a 1.1% increase over the expiring rental rates, however we note that ECW’s warehouse management services that have been provided to China Tobacco will no longer be required for the renewal lease term due to their internal restructuring. The termination of the warehouse management services will reduce ECW’s total revenue by about 1.1% (annualised based on 2Q20 gross revenue)





(Non-SGX Report) EC World Reit: Enhanced Income Visibility and Stability

<div><em><strong>These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
<p></p>
<p>RESULTS UPDATE REIT&nbsp;</p>
<div>
<h2>EC WORLD REIT</h2>
<div>
<p><strong>Buoyant in rough waters, but keeping a life jacket for ease of mind</strong></p>
<div>
<ul>
<li><strong>Maintain OUTPERFORM</strong> <strong>and maintain 12M TP of S$0.73</strong>. Revenue and NPI for 1H20 were in line with expectations, making up approximately 50% of our full year forecasts. 2Q20 DPU increased 20% from 1Q20 to 1.386 Singapore cents, representing an annualised distribution yield of 7.4%</li>
</ul>
<div>
<ul>
<li><strong>China expected to dodge a second wave with faster, better prepared response to virus spread.</strong> We do not expect China to face a second wave of the Covid-19 pandemic, given that it is now much better prepared and ready, in every capacity, to fight any further clusters of outbreaks, just as it did earlier in June/July in Beijing.</li>
</ul>
<div>
<div>
<div>
<ul>
<li><strong>Flat reversions for renewals, but organic growth intact.</strong> Despite flat reversions, management have been proactive in protecting unitholders’ interests by shortening renewed leases. Stipulated yearly contractual rental escalations with master lessees will also continue to support DPU growth.</li>
</ul>
</div>
<div>
<div>
<div>
<p><strong>1H20 review.</strong> Revenue and NPI for 1H20 were in line with expectations, making up approximately 50% of our full year forecasts. 2Q20 NPI increased by more than 20% as compared to 1Q20, due to rental rebates totalling S$4.72mn that were offered to tenants in the last quarter. This quarter, management has retained 10% of distributable income (DI) (1Q20: 5% DI retained; still unused as of 2Q20) for prudence and cash flow management in the coming quarters, given the highly uncertain and fluid situation as Covid-19 continues to haunt. As of 1H20, the total amount retained is S$1.72mn, which we think will likely be redistributed to unitholders by the end of 2021 at the latest.</p>
<div>
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<p>We doubt there will be a second wave of the pandemic in China, given its formidable response to the mini-outbreak in its capital city earlier in June. Lockdowns of high-risk neighbourhoods (41 of 7,000 in Beijing) were swiftly enforced, aggressive contact tracing followed by mass quarantine and mass testing. Some residents were allegedly ordered to take virus tests after authorities used security camera footage of car license plates to determine who had been in the vicinity of the market. Within a week, some 2.3 million people had undergone testing for the virus, and by the end of June, local cases were already down to single digits; from July 7th, there were no more local cases. As Dr Leong Hoe Nam, an infectious disease specialist at Singapore's Mount Elizabeth Novena Hospital told AFP, “Nobody has the resources, capabilities, determination and financial ability, and of course social capital, to do this except China,"; we take a similar view and are thus confident that a second wave in China is highly unlikely, and ECW’s performance should take no further hits for the rest of FY20.</p>
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These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.

RESULTS UPDATE REIT&nbsp;

EC WORLD REIT

Buoyant in rough waters, but keeping a life jacket for ease of mind


Maintain OUTPERFORM and maintain 12M TP of S$0.73. Revenue and NPI for 1H20 were in line with expectations, making up approximately 50% of our full year forecasts. 2Q20 DPU increased 20% from 1Q20 to 1.386 Singapore cents, representing an annualised distribution yield of 7.4%



China expected to dodge a second wave with faster, better prepared response to virus spread. We do not expect China to face a second wave of the Covid-19 pandemic, given that it is now much better prepared and ready, in every capacity, to fight any further clusters of outbreaks, just as it did earlier in June/July in Beijing.





Flat reversions for renewals, but organic growth intact. Despite flat reversions, management have been proactive in protecting unitholders’ interests by shortening renewed leases. Stipulated yearly contractual rental escalations with master lessees will also continue to support DPU growth.





1H20 review. Revenue and NPI for 1H20 were in line with expectations, making up approximately 50% of our full year forecasts. 2Q20 NPI increased by more than 20% as compared to 1Q20, due to rental rebates totalling S$4.72mn that were offered to tenants in the last quarter. This quarter, management has retained 10% of distributable income (DI) (1Q20: 5% DI retained; still unused as of 2Q20) for prudence and cash flow management in the coming quarters, given the highly uncertain and fluid situation as Covid-19 continues to haunt. As of 1H20, the total amount retained is S$1.72mn, which we think will likely be redistributed to unitholders by the end of 2021 at the latest.



We doubt there will be a second wave of the pandemic in China, given its formidable response to the mini-outbreak in its capital city earlier in June. Lockdowns of high-risk neighbourhoods (41 of 7,000 in Beijing) were swiftly enforced, aggressive contact tracing followed by mass quarantine and mass testing. Some residents were allegedly ordered to take virus tests after authorities used security camera footage of car license plates to determine who had been in the vicinity of the market. Within a week, some 2.3 million people had undergone testing for the virus, and by the end of June, local cases were already down to single digits; from July 7th, there were no more local cases. As Dr Leong Hoe Nam, an infectious disease specialist at Singapore's Mount Elizabeth Novena Hospital told AFP, “Nobody has the resources, capabilities, determination and financial ability, and of course social capital, to do this except China,"; we take a similar view and are thus confident that a second wave in China is highly unlikely, and ECW’s performance should take no further hits for the rest of FY20.













Non-SGX Report: Ec World Reit: Buoyant in Rough Waters, but Keeping a Life Jacket for Ease of Mind

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><div>
<div>
<div>
<div>
<p>COMPANY UPDATE</p>
</div>
</div>
</div>
</div>
<h2>EC WORLD REIT</h2>
<div>
<h3>No need for panic</h3>
<p></p>
<ul>
<li><strong>Reiterate OUTPERFORM with 12M TP of S$0.73.</strong> We do not believe that the investigation into Mr Li Jinbo has any relation to the REIT or its Manager, and thus will not have any effect, operationally or otherwise, on the REIT’s performance. CAD has made clear that neither the REIT nor its Manager is under investigation. However, we will continue to monitor the situation closely, and provide further updates as they arise.</li>
<li>
<p><strong>Operationally steady.</strong> All tenants are back to pre-Covid operation levels. The second wave of outbreak in Beijing has not affected any of the assets or tenants, and there has been no cases reported in Hangzhou. Lease renewal for Hengde Logistics, expiring in October 2020, is on track and in progress, although rental reversions are likely to be flat.</p>
</li>
</ul>
<div>
<div>
<div>
<p><strong>Joint investigation by CAD and MAS into Chief Investment Officer (CIO) Mr Li Jinbo.</strong> As per the announcement published on SGX on 2 July 2020, ECW has been required to provide certain information, documents and electronic devices (presumably items such as laptops) in relation to an investigation into Mr Li Jinbo. The investigation relates to an alleged offence under the Securities and Futures Act, Chapter 289, which refers to “the regulation of activities and institutions in the securities and derivatives industry, including leveraged foreign exchange trading, of financial benchmarks and of clearing facilities, and for matters connected therewith.” We highlight that the CAD has indicated that ECW and its Manager are not under investigation, and have also received no further information or details regarding the investigation into Mr Li Jinbo.</p>
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These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



COMPANY UPDATE




EC WORLD REIT

No need for panic


Reiterate OUTPERFORM with 12M TP of S$0.73. We do not believe that the investigation into Mr Li Jinbo has any relation to the REIT or its Manager, and thus will not have any effect, operationally or otherwise, on the REIT’s performance. CAD has made clear that neither the REIT nor its Manager is under investigation. However, we will continue to monitor the situation closely, and provide further updates as they arise.

Operationally steady. All tenants are back to pre-Covid operation levels. The second wave of outbreak in Beijing has not affected any of the assets or tenants, and there has been no cases reported in Hangzhou. Lease renewal for Hengde Logistics, expiring in October 2020, is on track and in progress, although rental reversions are likely to be flat.





Joint investigation by CAD and MAS into Chief Investment Officer (CIO) Mr Li Jinbo. As per the announcement published on SGX on 2 July 2020, ECW has been required to provide certain information, documents and electronic devices (presumably items such as laptops) in relation to an investigation into Mr Li Jinbo. The investigation relates to an alleged offence under the Securities and Futures Act, Chapter 289, which refers to “the regulation of activities and institutions in the securities and derivatives industry, including leveraged foreign exchange trading, of financial benchmarks and of clearing facilities, and for matters connected therewith.” We highlight that the CAD has indicated that ECW and its Manager are not under investigation, and have also received no further information or details regarding the investigation into Mr Li Jinbo.





Non-SGX Report: Ec World Reit: No Need for Panic

<p><em><strong>These equity research reports are not written by the SGX.</strong> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p><div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<p>RESULTS UPDATE</p>
</div>
</div>
</div>
</div>
<h2>EC WORLD REIT</h2>
<div>
<div>
<div>
<p><strong>Normalcy with an added sprinkle of caution</strong></p>
<div>
<div>
<div>
<ul>
<li>Maintain OUTPERFORM with revised 12M TP of S$0.73. 1Q revenue and NPI makes up 23% and 22.4% of our revised FY20F forecasts, while DPU contributes 21.4%. Slight drop in 1Q revenue YoY was mainly due to one-off rental rebates offered to tenants, while DPU is lower mainly due to a 5% retention for prudence and financial fluidity during this period.</li>
<li>All tenants back in business. As of 31 March 2020, tenants in all assets have resumed operations, although port logistics assets are still seeing a slowdown in supply and demand due to the extended Spring Festival Holidays (Chinese New Year).</li>
<li>Reversions likely to be flat. Given the economic outlook in China, as well as a slowing business environment, management have no expectations for any rental reversions for new or renewed leases signed in 2020.</li>
</ul>
<div>
<div>
<div>
<p><strong>1Q20 review.</strong> Rental rebates of approximately RMB23.7mn or S$4.76mn (about half a month in rent) were offered to tenants to help mitigate the impact of forced closures during the lockdown period. Varying from the retail S-REITs who have offered rebates for several months at a time to those affected by closures imposed by the government, management expects rental rebates to be one-off in nature.</p>
<p>However, it should be noted that the decline in revenue due to the rebates were mitigated to some extent, by the full quarter contribution by its newest asset, Fuzhou E- Commerce. DPU would have been SGD 1.529 cents for 1Q20 without the impact of rental rebates.</p>
<p>Management has also proceeded to retain 5% (amounting to c. S$500k) of 1Q20 distributable income for prudence, in case of any unforeseen circumstances. Should the 5% DPU not be needed, management will consider re-distributing the amount in the future, after the Covid-19 situation stabilizes. We have factored in the return of said distributable income by the end of the year. Even if a second wave of infections occurs, we believe that the Chinese Government will be sufficiently, and much more prepared to suppress the spread.</p>
<p>As of 31 March 2020, all tenants in all assets, including Wuhan Meiluote, have resumed operations and with the full force of workers. We note that there were e-commerce tenants who were continuously operational during the extended Spring Holidays, as they catered to the essential services such as the provision of food and medical supplies. Hengde Logistics also remained somewhat operational as the tobacco curing process was still ongoing, despite a lower workforce.</p>
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These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.







RESULTS UPDATE




EC WORLD REIT



Normalcy with an added sprinkle of caution




Maintain OUTPERFORM with revised 12M TP of S$0.73. 1Q revenue and NPI makes up 23% and 22.4% of our revised FY20F forecasts, while DPU contributes 21.4%. Slight drop in 1Q revenue YoY was mainly due to one-off rental rebates offered to tenants, while DPU is lower mainly due to a 5% retention for prudence and financial fluidity during this period.
All tenants back in business. As of 31 March 2020, tenants in all assets have resumed operations, although port logistics assets are still seeing a slowdown in supply and demand due to the extended Spring Festival Holidays (Chinese New Year).
Reversions likely to be flat. Given the economic outlook in China, as well as a slowing business environment, management have no expectations for any rental reversions for new or renewed leases signed in 2020.




1Q20 review. Rental rebates of approximately RMB23.7mn or S$4.76mn (about half a month in rent) were offered to tenants to help mitigate the impact of forced closures during the lockdown period. Varying from the retail S-REITs who have offered rebates for several months at a time to those affected by closures imposed by the government, management expects rental rebates to be one-off in nature.
However, it should be noted that the decline in revenue due to the rebates were mitigated to some extent, by the full quarter contribution by its newest asset, Fuzhou E- Commerce. DPU would have been SGD 1.529 cents for 1Q20 without the impact of rental rebates.
Management has also proceeded to retain 5% (amounting to c. S$500k) of 1Q20 distributable income for prudence, in case of any unforeseen circumstances. Should the 5% DPU not be needed, management will consider re-distributing the amount in the future, after the Covid-19 situation stabilizes. We have factored in the return of said distributable income by the end of the year. Even if a second wave of infections occurs, we believe that the Chinese Government will be sufficiently, and much more prepared to suppress the spread.
As of 31 March 2020, all tenants in all assets, including Wuhan Meiluote, have resumed operations and with the full force of workers. We note that there were e-commerce tenants who were continuously operational during the extended Spring Holidays, as they catered to the essential services such as the provision of food and medical supplies. Hengde Logistics also remained somewhat operational as the tobacco curing process was still ongoing, despite a lower workforce.














Non-SGX Report: Ec World Reit: Normalcy with an Added Sprinkle of Caution

Singapore

EC World Real Estate Investment Trust (EC World REIT) is the first Chinese specialised logistics and e-commerce logistics REIT listed on SGX-ST. 

It has a portfolio of quality properties located predominantly in one of the largest e-commerce clusters in the Yangtze River Delta which offers investors unique exposure to the logistics and e-commerce sectors in Hangzhou and Wuhan, China.
  
EC World REIT’s investment strategy is to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate which is used primarily for e-commerce, supply-chain management and logistics purposes, as well as real estate-related assets, with an initial geographical focus on the PRC. 

EC World REIT is listed in several indices. These include the FTSE ASEAN All-Share Index, FTSE ST All-Share Index, FTSE ST China Index and FTSE ST Singapore Shariah Index. For more information, please visit: http://www.ecwreit.com/ 

EC World REIT is managed by EC World Asset Management Pte. Ltd., which is an indirect wholly-owned subsidiary of the Sponsor – Forchn Holdings Group Co., Ltd.

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EC World Reit (ECWREIT SP)

REIT Watch - S-Reits under S$1b lead sector in Q1 2021

ELEVEN smaller cap Reits in the iEdge S-Reit Index with market capitalisation under S$1 billion have all generated positive...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) EC World Reit: Enhanced Income Visibility and Stability

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

Non-SGX Report: Ec World Reit: Buoyant in Rough Waters, but Keeping a Life Jacket for Ease of Mind

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Singapore Exchange Ltd (SGX)

Non-SGX Report: Ec World Reit: No Need for Panic

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Singapore Exchange Ltd (SGX)

Non-SGX Report: Ec World Reit: Normalcy with an Added Sprinkle of Caution

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Singapore Exchange Ltd (SGX)

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