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EC World Real Estate Investment Trust’s Latest Earnings Update: Strong Growth In Distributions

Yesterday evening, EC World Real Estate Investment Trust (SGX: BWCU) reported its 2018 third quarter earnings update. As a quick introduction for better context later, EC World REIT specialises in logistics and e-commerce logistics properties in China. The REIT currently has seven properties in its portfolio that are located in the Chinese cities of Hangzhou and Wuhan.

Let’s take a quick look at the important points about EC World REIT’s latest results:

1. Gross revenue for the reporting quarter inched up by 0.1% year-on-year to S$23.9 million. Similarly, net property income saw slight growth of 0.5% to S$22.2 million. The growth in the REIT’s gross revenue and net property income was attributed to contributions from the newly acquired Wuhan Meiluote property (the deal was done in April 2018) which partially offset a weaker renminbi.

2. Despite the tepid top-line growth, EC World REIT’s distributable income increased by 10.0% to S$12.4 million from a year ago. This resulted in a 9.0% jump in distribution per unit (DPU) to 1.570 cents. EC World REIT’s DPU benefited from lower expenses and the absence of a 5% withholding tax that was charged in 2017’s third quarter. If the impact from the withholding tax is removed, EC World REIT’s year on year DPU growth in 2018’s third quarter would be 2.3%.

3. As of 30 September 2018, the REIT’s gearing stood at 30.7%, which is a very safe distance from the regulatory gearing limit of 45%.
The REIT’s weighted average interest rate came in at 4.4% per year, and its debt matures in July 2019. The REIT also reported that 100% of its loans are on fixed rates – this mitigates risk from interest rate hikes. EC World REIT has hedged its expected distributable income too, for 2018’s fourth quarter, thereby reducing the risk of currency fluctuations.

4. EC World REIT’s portfolio had an end-tenant occupancy rate of 96.9% and a committed occupancy of 99.2% at the end of the reporting quarter. The weighted average lease expiry (by gross rental income) of EC World REIT’s property portfolio came in at 2.3 years, with only 0.4% of the leases expiring in the remaining months of 2018.

5. The REIT’s net asset value came in at S$0.87 per unit in the third quarter of 2018, down from S$0.87 a year ago, and S$0.92 in the second quarter.

6. Goh Toh Sim, the executive director and CEO of EC World REIT’s Manager, shared the following comments on the REIT’s outlook in the latest earnings update:

“We are delighted to deliver another quarter of healthy distributions for our unitholders despite the macroeconomic headwinds and global uncertainty. EC World REIT’s assets are generally unaffected as the tenants within the portfolio serve primarily the domestic China market focused on domestic consumption. As such, we do not expect the ongoing global uncertainty to have a material negative impact on the operation of our assets.”

EC World REIT’s unit price is currently S$0.69, which gives the REIT a price-to-book ratio of 0.79, and a trailing distribution yield of 8.86%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own shares in any companies mentioned. 

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in any companies mentioned.