How is EC World REIT performing?

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has 1442 followers.

The following table is the REIT’s distribution per unit for the current quarter under review, compared to the same period last year:

Despite the Singapore Exchange allowing companies to switch to reporting its full financial results on a half-yearly basis, EC World REIT (SGX:BWCU) at the moment is still continuing to report its full financial results on a quarterly basis, along with declaring a distribution payout to its unitholders once every three months as well (however, that could change in the future.)

Aftermarket hours yesterday (09 November 2020), the China-based logistics REIT reported its financial results for the third quarter, as well as for the first nine-months of the financial year 2020 (ended 30 September 2020.)

As a unitholder of the REIT, I have studied its results and in this post, you will find key aspects about its latest financial results, debt and portfolio occupancy profile, as well as its distribution payouts, along with my personal thoughts to share.

Let’s begin…

Financial Performance (Q3 FY2019 vs. Q3 FY2020, and 9M FY2019 vs. 9M FY2020)

In this section, I will be looking at the REIT’s latest financial performance both on a quarter-on-quarter (q-o-q), as well as on a year-on-year (y-o-y) basis:

Q3 FY2019 vs. Q3 FY2020:

	Q3 FY2019	Q3 FY2020	% Variance
Gross Revenue (S$’mil)	$25.7m	$28.5m	+10.8%
Property Operating Expenses (S$’mil)	$2.8m	$2.3m	-15.6%
Net Property Income (S$’mil)	$22.9m	$26.1m	+14.0%
Distributable Income to Unitholders (S$’mil)	$11.9m	$11.2m	-5.9%

The logistics REIT’s latest quarter results is a mixed one compared to the same time period last year – the 10.8% and 14.0% growth in its gross revenue and net property income respectively can be attributed to the newly acquired Fuzhou Ecommerce (which was acquired in August 2019), and organic rental escalations; on the other hand, its distributable income to unitholders fell by 5.9% compared to the same time period last year due to the management retaining 9% of the total amount available for distribution in view of the uncertainties arising from the ongoing Covid-19 pandemic globally.

9M FY2019 vs. 9M FY2020:

	9M FY2019	9M FY2020	% Variance
Gross Revenue (S$’mil)	$73.3m	$80.2m	+9.5%
Property Operating Expenses (S$’mil)	$8.0m	$7.1m	-11.4%
Net Property Income (S$’mil)	$65.3m	$73.1m	+12.0%
Distributable Income to Unitholders (S$’mil)	$36.1m	$31.6m	-12.5%

Similar to its q-o-q results, on a y-o-y basis, its gross revenue and net property income went up by 9.5% and 12.0% respectively, also due to the contribution from the newly acquired Fuzhou Ecommerce, along with organic rental escalations. On the other hand, its distributable income fell by 12.5%, mainly due to rental rebates given out in the first quarter of the financial year, as well as the retention of distributable income (for prudence.)

My Thoughts: With the Covid-19 situation currently under control in China, and normal lives have since resumed, the improvement in its results for the third quarter came as no surprise to me.

Also, as far as the retention of 9% of the distributable income is concerned, considering the fact that many countries are now seeing a second wave outbreak, it is understandable why the REIT’s management has made the decision.

Debt Profile (Q2 FY2020 vs. Q3 FY2020)

If you have read my review on the REIT’s debt profile in the second quarter (you can read the post in full here), you are probably aware that I have some concerns about its high gearing ratio, and that I will be keeping a close watch on it in the quarters ahead.

With that, let us find out if the REIT’s debt profile has improved or deteriorated three months on (I will be comparing the REIT’s debt profile recorded for the third quarter of FY2020 ended 30 September 2020 against the second quarter of FY2020 ended 30 June 2020):

	Q2 FY2020	Q3 FY2020	Difference (in Percentage Points)
Gearing Ratio (%)	39.1%	38.3%	-0.8pp
Average Cost of Debt (%)	4.3%	4.2%	-0.1pp

 

My Thoughts: It’s good to see the REIT’s debt profile improving 3 months on, with its gearing ratio falling by 0.8 percentage points (pp), and its average cost of debt edging down slightly by 0.1pp.

I also understand that there are no refinancing requirements in the near-term, which is good to note.

Portfolio Occupancy Profile (Q2 FY2020 vs. Q3 FY2020)

Just like how I have looked at the REIT’s debt profile in the previous section, in this section, I will be looking at its portfolio occupancy profile in a similar fashion, where I will be comparing its the figures recorded in the current quarter under review (i.e. Q3 FY2020 ended 30 September 2020) against the figures recorded in the previous quarter (i.e. Q2 FY2020 ended 30 June 2020) to find out if it has improved or deteriorated:

	Q2 FY2020	Q3 FY2020
Portfolio Occupancy (%)	98.7%	96.7%
Portfolio Weighted Average Lease Expiry (by Gross Rental Income – in Years)	3.6 years	3.3 years

 

My Thoughts: While there was a slight decline in the REIT’s portfolio occupancy rate as at 30 September 2020, but if we were to include the new lease at Wuhan Meiluote which commenced from end-October 2020, its portfolio occupancy rate will be at 99.0%, which is a 0.3pp improvement compared to the previous quarter.

In my personal opinion, the REIT’s portfolio occupancy profile is a resilient one.

Distribution Per Unit (Q3 FY2019 vs. Q3 FY2020)

	Q3 FY2019	Q3 FY2020	% Variance
Distribution Per Unit (S$’cents)	1.489 cents	1.388 cents	-6.8%

On a q-o-q basis, the REIT’s distribution per unit fell by 6.8% due to a higher unit base, along with a 9% retention of the total amount available for distribution.

If you are a unitholder of the REIT, you may want to take note of the following dates:

Ex-date: 11 December 2020
Record date: 14 December 2020
Payout date: 29 December 2020

In Conclusion

As a unitholder, I am pleased to note the q-o-q, as well as y-o-y improvements in the REIT’s gross revenue and net property income, along with improvements recorded in its debt profile.

I am of the opinion that, barring a second wave of the outbreak in China (and another round of lockdown measures being implemented), the logistics REIT’s performance for the fourth quarter should be a better one (as far as its gross revenue and its net property income are concerned.)

With that, I have come to the end of my review of EC World REIT’s latest quarter results. Do take note that whatever you’ve read in this post is meant for educational purposes only. They do not represent any buy or sell recommendations for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.

Related Documents

• Press Release

• Financial Statements

• Presentation Slides

Disclaimer: At the time of writing, I am a unitholder of EC World REIT.