EC World REIT - DBS Research 2020-05-14: Business As Usual


EC World REIT - Business As Usual

  • Tenants in all properties have resumed operations.
  • RMB23.7m in rental rebates were given to tenants; equivalent to half month of rent.
  • EC World REIT's 1Q20 distributable income and DPU declined 23.2% and 23.3% to S$9.8m and 1.158 Scts respectively.
  • 5% of distributable income was retained as a prudent measure and to maintain some financial flexibility.

Revenues lowered by rental rebates

  • EC World REIT (SGX:BWCU)'s 1Q20 revenues and NPI fell to S$23.5m and S$21.1m respectively.
    • 9.0% and 13.6% declines in revenues and NPI mainly due to one-off rental rebates.
    • RMB23.7m rebates given to tenants due to impact of COVID-19; equivalent to half month of rent.
  • On a y-o-y basis, revenues and NPI declined by a smaller 1.4% and 0.2% respectively.
    • Declines were mainly due to rental rebates given and weaker RMB y-o-y.
    • However, contribution from Fuzhou E-Commerce acquired in August 2019 helped mitigate the decline.
  • EC World REIT's 1Q20 DPU of 1.158 Scts was 23.3% lower q-o-q.
    • 5% of distributable income was retained as a prudent measure and to maintain some financial flexibility.
    • Excluding rental rebates, DPU would have increased 1.3% q-o-q (1.529 Scts).
  • NAV increased S$0.05 q-o-q to S$0.90; mainly due to stronger RMB in 1Q20.

Improved capital structure

  • EC World REIT's gearing improved marginally by 0.1ppt q-o-q to 38.6%; mainly due to stronger RMB.
  • All-in borrowing costs fell 0.1ppt to 4.3%.
  • Weighted average debt expiry of 2.37 years with an ICR of 2.85x.
  • No refinancing due until FY22.
  • Continues to maintain a 6-month forward income hedging.

Portfolio operations back to normal

  • EC World REIT's 1Q20 operations were impacted by the extended Spring Holidays followed by the lockdown due to COVID-19.
  • Tenant operations were also impacted by a delay in migrant workers travelling back for work.
  • However, all tenants had resumed operations by the end of March.
  • Portfolio occupancy fell 0.87ppt q-o-q to 99.1%.
    • Fall in occupancy at Wuhan Meiluote (93.3%) and Chongxian Port Logistics (95.5%).
    • WALE remained healthy at 3.8 years.
  • 26.2% of portfolio leases will be expiring in FY20.
    • Approximately half of expiries due to China Tobacco’s lease at Hengde Logistics expiring in the later part of FY20.
    • Rest of expiries at Wuhan Meiluote and Chongxian Port Logistics.
    • Focused on retaining tenants, rent reversions likely to remain flat.
    • In advanced negotiations with China Tobacco to extend its lease.

Our Views

Dale LAI DBS Group Research | Derek TAN DBS Research | 2020-05-14
SGX Stock Analyst Report BUY MAINTAIN BUY 0.800 SAME 0.800