Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

Vietnam Real estate / Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ec-world-reit" target="_blank" data-smartkarma-citation="entities:22842" rel="noopener">EC World Reit (ECWREIT SP)</a> – Cushioned by retained DI (BUY; TP S$0.87/Unit)</h3><p>ECWREIT has released partial of previously retained DI in 2Q21, and is likely to continue to do so in the coming quarters. Meanwhile, acquisition offer from Forchn-led consortium is still live and likely to reach a verdict by end-2021. Reiterate BUY with higher TP of S$0.87/unit, after adjusting for stronger Port Logistics revenue and RMB, as well as higher OpEx and tax in FY21E. We expect ECWREIT to fully release FY19-20 retained DI while retaining 10% of DI in FY21E, and payout ratio to normalize to 99.5% in FY22E and onwards.</p><p>Stable performance; Cushioned by retained DI. After adjusting for effective rent, security deposit accretion and other relevant distribution adjustments, 2Q21 Revenue and NPI were up 5.3% and 2.7% YoY, respectively. However, 2Q21 DI decreased 6.4% YoY on higher finance costs and withholding tax. ECWREIT has thus released S$1.951m (or S$0.242c/unit) of previously retained DI, propping 2Q21 DPU up to S$1.532c, 10.5% YoY higher or the same as 1Q21. Meanwhile, ECWREIT continued to retain 10% of DI in 2Q21. There are S$5.34m of retained DI (or S$0.662c/unit) remaining for ECWREIT to stabilise or boost future DPU. 1H21 Revenue/ NPI/ DPU formed ~51% of our full-year FY21E forecasts</p><p>Built-in rental escalations to sustain organic growth. Stronger performances from Port Logistics and E-commerce Logistics portfolios have offset the weaker Specialised Logistics portfolio. Notably, we have seen sustained revenue growth for its Port Logistics portfolio, from low of S$9.06m in 1Q20 to S$13.12m in 2Q21, despite the minor disruption at Chongxian Port Investment. Following a major lease renewal at Hengde Logistics on 7May21, only 5.8% of NLA will be due for renewal for the remaining of FY21E. Out of which, c.5.0% of GRI will be from Chongxian Port Logistics and the remaining c.0.8% are from Wuhan Meiluote (dormitory site). Mgmt. is optimistic to renew the CXPL leases at similar terms and short-term tenure. On a separate note, insurance claim assessment in relation to the incident at Chongxian Port Investment is still ongoing and repair work is expected to start from end-Aug21</p><p>Potential privatisation by Forchn-led consortium is still on the table. Whilst there has been no update since Forchn International Pte. Ltd. first disclosed its interest to acquire ECWREIT’s interests in all of its properties on 17May21, mgmt. hopes for a conclusion to be reached by end-2021</p><p>Reiterate BUY with higher TP of S$0.87/unit. Organic growth should continue to underpin DPU growth. 4 of its master leases (contributed ~73% of FY20 revenue) with effective annual escalations should offer ~1.8% revenue growth pa. Potential re-rating catalyst in near term would be DPU accretive acquisition, in view of its current low gearing at 37.6%. ECWREIT is currently trading at 0.87x P/B and 7.3% FY21E yield.</p>

SingaporeEC World Reit (ECWREIT SP) – Cushioned by retained DI (BUY; TP S$0.87/Unit)ECWREIT has released partial of previously retained DI in 2Q21, and is likely to continue to do so in the coming quarters. Meanwhile, acquisition offer from Forchn-led consortium is still live and likely to reach a verdict by end-2021. Reiterate BUY with higher TP of S$0.87/unit, after adjusting for stronger Port Logistics revenue and RMB, as well as higher OpEx and tax in FY21E. We expect ECWREIT to fully release FY19-20 retained DI while retaining 10% of DI in FY21E, and payout ratio to normalize to 99.5% in FY22E and onwards.Stable performance; Cushioned by retained DI. After adjusting for effective rent, security deposit accretion and other relevant distribution adjustments, 2Q21 Revenue and NPI were up 5.3% and 2.7% YoY, respectively. However, 2Q21 DI decreased 6.4% YoY on higher finance costs and withholding tax. ECWREIT has thus released S$1.951m (or S$0.242c/unit) of previously retained DI, propping 2Q21 DPU up to S$1.532c, 10.5% YoY higher or the same as 1Q21. Meanwhile, ECWREIT continued to retain 10% of DI in 2Q21. There are S$5.34m of retained DI (or S$0.662c/unit) remaining for ECWREIT to stabilise or boost future DPU. 1H21 Revenue/ NPI/ DPU formed ~51% of our full-year FY21E forecastsBuilt-in rental escalations to sustain organic growth. Stronger performances from Port Logistics and E-commerce Logistics portfolios have offset the weaker Specialised Logistics portfolio. Notably, we have seen sustained revenue growth for its Port Logistics portfolio, from low of S$9.06m in 1Q20 to S$13.12m in 2Q21, despite the minor disruption at Chongxian Port Investment. Following a major lease renewal at Hengde Logistics on 7May21, only 5.8% of NLA will be due for renewal for the remaining of FY21E. Out of which, c.5.0% of GRI will be from Chongxian Port Logistics and the remaining c.0.8% are from Wuhan Meiluote (dormitory site). Mgmt. is optimistic to renew the CXPL leases at similar terms and short-term tenure. On a separate note, insurance claim assessment in relation to the incident at Chongxian Port Investment is still ongoing and repair work is expected to start from end-Aug21Potential privatisation by Forchn-led consortium is still on the table. Whilst there has been no update since Forchn International Pte. Ltd. first disclosed its interest to acquire ECWREIT’s interests in all of its properties on 17May21, mgmt. hopes for a conclusion to be reached by end-2021Reiterate BUY with higher TP of S$0.87/unit. Organic growth should continue to underpin DPU growth. 4 of its master leases (contributed ~73% of FY20 revenue) with effective annual escalations should offer ~1.8% revenue growth pa. Potential re-rating catalyst in near term would be DPU accretive acquisition, in view of its current low gearing at 37.6%. ECWREIT is currently trading at 0.87x P/B and 7.3% FY21E yield.

ASEAN Builder's Scoop (18Aug21)