EC World Real Estate Investment Trust (SGX: BWCU) is the first Chinese specialised logistics and e-commerce logistics real estate investment trust (REIT) that was listed here in July 2016. It owns properties mainly used for e-commerce, supply-chain management and logistics located in one of the largest e-commerce clusters in the Yangtze River Delta.
At its current unit price of S$0.75, it has a distribution yield of 8.3%, one of the highest in the Singapore REIT market right now. Here’s a look at why EC World REIT is attractive to investors who wish to ride on China’s e-commerce growth.
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Great location of assets
The REIT’s seven properties provide exposure to the logistics and e-commerce sectors in China’s Hangzhou and Wuhan regions.Source: EC World REIT investor presentation
Most of EC World’s properties are located in Hangzhou, one of the core cities in the Yangtze River Delta Economic Zone and is dubbed the “Chinese capital of e-commerce”. The global headquarters of Chinese e-commerce giant, Alibaba Group Holding Ltd (NYSE: BABA), is also located in the city and that bodes well for the city overall. In the first quarter of 2019, the city’s online retail sales increased by 48.4%, a 16.1% year-on-year growth.
China’s e-commerce growth
China is a force to be reckoned with when it comes to e-commerce. The country’s online retail sales have grown from RMB 761 billion in the first quarter of 2015 to RMB 2,238 billion in the first quarter of 2019. The country’s share of global e-commerce is forecast to grow from 43% in 2015 to 59% in 2020.Source: EC World REIT investor presentation
With only 38% of China’s total population shopping online, according to a 2018 report by The Forrester, there is indeed plenty of runway for China’s e-commerce market to grow.
The Foolish takeaway
Despite growing strongly in the past, I feel China’s e-commerce market is still in the nascent stages. As the Chinese get more sophisticated and internet penetration gets more prevalent in the lower-tier cities, more people will be inclined to shop online. And that bodes well for REITs such as EC World REIT. At an 8% distribution yield and with plenty of growth opportunities ahead, it certainly has attracted me as an income and growth opportunity.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.