MENU

What Investors Should Know About EC World Real Estate Investment Trust’s Latest Earnings Update and Valuation

Credit: Axisadman

EC World Real Estate Investment Trust (SGX: BWCU) is the first REIT in Singapore’s market that focuses on specialized logistics and e-commerce logistics facilities that are based in China. The properties in its portfolio are mainly for e-commerce, supply-chain management, and logistics activities.

There are two things you may want to know about the REIT right now: Its latest financial performance and valuation.

Financial performance

Here is a table showing important items from EC World REIT’s income statement for the first quarter of 2018:


Source: EC World REIT earnings update

The REIT had a mixed quarter. Gross revenue increased, but net property income, distributable income, and distribution per unit (DPU) all declined. But, EC World REIT’s distribution was affected by a 5% withholding tax that arose due to the repatriation of cash from the REIT’s asset companies in China in the quarter. (The REIT’s manager has no intention to repatriate any further cash from the asset companies for the rest of 2018.)

Without the withholding tax, EC World REIT’s distributable income and DPU would have shown year-on-year growth instead.

As of 31 March 2018, EC World REIT had a gearing ratio of just 28.9%, which is far below the regulatory gearing limit of 45%. Meanwhile, its occupancy rate stood at 100%.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows EC World REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 42 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts

We can see that EC World REIT is trading at a significant discount to the market-average, given its much lower PB ratio, and higher distribution yield.

Worried about the overall state of the market? Do you know the 1 thing you should never do in the stock market? The Motley Fool Singapore's new e-book lays out a plan to handle market crashes, details the greatest advantage you have as an investor, and looks at decades worth of market data to bring you the smartest insights on investing. You can download the full e-book FREE of charge--Simply click here now to claim your copy.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.