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 close to 2,000 followers.

China-based logistics REIT, EC World REIT (SGX:BWCU) released its financial results for the first quarter of the financial year 2021 ended 31 March 2021 after market hours yesterday (11 May 2021.)

The REIT is one of the few that has continued to report its full financial results, along with payout a distribution to its unitholders on a quarterly basis – both of which are something I appreciate as a unitholder.

In this post, you will find key highlights about the logistics REIT’s latest financial results, debt and portfolio occupancy profile, and distribution payouts, along with my personal thoughts to share.

Let’s begin…

Financial Results (Q1 FY2020 vs. Q1 FY2021)

	Q1 FY2020	Q1 FY2021	% Variance
Gross Revenue (S$’mil)	$23.5m	$30.8m	+30.9%
Property Operating Expenses (S$’mil)	$2.4m	$3.1m	+30.3%
Net Property Income (S$’mil)	$21.1m	$27.7m	+30.9%
Distributable Income to Unitholders (S$’mil)	$9.3m	$12.4m	+32.9%

From the table above, you can tell that the REIT’s latest quarter results was an improved one across the board.

The improvements in its gross revenue and net property income can be attributed to the absence of rental rebates given out to tenants to help them mitigate the negative impacts of the Covid-19 pandemic in the same time period last year, along with the Chinese Renminbi strengthening by 3.5%.

In-line with the improvements in its gross revenue and net property income, the REIT’s distributable income to unitholders also increased by a similar percentage.

Debt Profile (Q4 FY2020 vs. Q1 FY2021)

Next, let us take a look at the REIT’s latest debt profile (recorded for the first quarter of FY2021 ended 31 March 2021), compared against that recorded in the previous quarter three months ago (i.e. Q4 FY2020 ended 31 December 2020) to find out whether it has improved, remained consistent, or deteriorated:

	Q4 FY2020	Q1 FY2021
Aggregate Leverage (%)	38.1%	38.3%
Interest Coverage Ratio (times)	2.62x	2.79x
Average Term to Debt Maturity (years)	1.6 years	1.4 years
Average Cost of Debt (%)	4.2%	4.1%

My Observations: Personally, I felt that the REIT’s debt profile for the current quarter under review, compared to the previous quarter 3 months ago, was a mixed bag – first, the positives (in my opinion): a slight decrease in its average cost of debt, along with its interest coverage increasing slightly; the negatives: its aggregate leverage edging up slightly, along with its average term to debt maturity (which is now at 1.4 years, from 1.6 years in the previous quarter.)

I understand from the REIT’s documents that the Board of Directors have decided to maintain a stable aggregate leverage ratio of not more than 40.0% (as at 31 March 2021, its aggregate leverage is just slightly under; and if that’s the case, then it could impact its ability to make further yield-accretive acquisitions in my opinion), and that the Manager will continue to actively explore and diversify sources of funding as well as hedging instruments to optimise the REIT’s capital structure.

Portfolio Occupancy (Q4 FY2020 vs. Q1 FY2021)

Similar to how I have studied the REIT’s debt profile in the previous section, I too will be comparing its portfolio occupancy profile recorded for the current quarter under review (i.e. Q1 FY2021 ended 31 March 2021) against the previous quarter (i.e. Q4 FY2020 ended 31 December 2020):

	Q4 FY2020	Q1 FY2021
Portfolio Occupancy (%)	99.3%	99.1%
Portfolio WALE (by Gross Rental Income – years)	3.4 years	3.1 years

My Observations: Compared to three months ago, the REIT’s portfolio occupancy profile have weakened slightly – but having said that, at 99.1%, the REIT’s portfolio occupancy is still considered very good in my opinion.

Another point to note is that, for the remaining quarters of FY2021, just 11.8% of the leases are due for renewal.

Distribution Per Unit (Q1 FY2020 vs. Q1 FY2021)

As I’ve mentioned in the beginning of this post, EC World REIT is one of the few Singapore-listed REITs that is continuing to pay out a distribution to its unitholders on a quarterly basis.

The following table is the REIT’s distribution per unit for the current quarter under review (i.e. Q1 FY2021) compared to the same time period a year ago (i.e. Q1 FY2020):

	Q1 FY2020	Q1 FY2021	% Variation
Distribution Per Unit (S$’cents/unit)	1.158 cents	1.532 cents	+32.3%

Along with a 30+% improvement in its top- and bottom-line, the REIT’s distribution per unit have also gone up by a similar percentage.

Despite of that, I note that the Manager have continued to retain 10.0% of the total amount available for distribution in view of the uncertainties arising from the Covid-19 pandemic globally, as well as for general working purposes.

If you are a unitholder of the REIT, here are the dates relating to its distribution payout you need to take note of:

Ex-Date: 14 June 2021
Record Date: 15 June 2021
Payout Date: 29 June 2021

Closing Thoughts

On the whole, the logistics REIT’s latest set of results was a mixed one – while its financial performance improved (which was quite expected due to the lack of rental rebates given out to tenants for the current quarter under review as business normalcy in China have more or less returned), but its debt and portfolio occupancy profiles have weakened (albeit slightly.)

Another point to note is the REIT’s management’s decision to once again retain 10.0% of the distributable income to unitholders. Given many countries are currently experiencing another wave of outbreak (even Singapore, which have managed to successfully contain the community spread for many months is not spared as well), I have to say that I agree with the management’s view to err on the side of caution.

With that, I have come to the end of my review on EC World REIT’s latest results update. Just before I end today’s post, I would like to take this opportunity to wish all my Muslim readers Selamat Hari Raya Aidilfitri. May you have a joyful celebration with your loved ones tomorrow.

Related Documents

• Press Release
• Financial Statements
• Presentation Slides

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

Once again, this article is a guest post and was originally posted on Jun Yuan‘s profile on InvestingNote.

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