Excerpts from KGI Research report


Analyst: Amirah Yusoff

• EC World REIT is the only specialized and e-commerce logistics S-REIT that provides investment access into China’s booming e-commerce industry.

c.40% of its investment assets (by AUM valuation) are also quality port logistics assets with prime and coveted access to the Beijing-Hangzhou Grand Canal due to recent UNESCO Heritage Site zonings.

EC World REIT

Unit price: 
74 c

Target: 
84 c

• EC World REIT also has the established and capable Forchn Holdings Group co as its sponsor, who was also one of the founding members of Cainiao Network Tech Co Ltd., along with partners Alibaba Group and Fosun Group.

We believe that with the support and guidance of its sponsor, there is still a long runway for future growth and expansion.

• We initiate coverage on EC World REIT (ECW) with an OUTPERFORM recommendation.

Our target price of SGD$0.84 represents a total upside of 23.4%, inclusive of FY20F dividend yield of 9.1%.



Investment Thesis
High income visibility. ECW’s portfolio is well-diversified into the three main logistics segments: Port, Specialised, and ECommerce logistics, lending stability to its income.

mgt gab event6.18bL-R: Johnny Tng, CFO | Goh Toh Sim, CEO | Li Jinbo, Head of Investments, Asset Management and Investor Relations. Photo: GCP GlobalThey have also proven stable 99%-100% occupancy levels since IPO, and have a WALE of 4.3 years by net lettable area (NLA), as of 30 September 2019.

Four of its eight properties are directly and indirectly master-leased to its sponsor (representing c.70% of gross rental income (GRI)), while another is leased to a China State-Owned-Enterprise (SOE), China Tobacco Zhejiang Industrial Co., Ltd.

Established, capable, & committed sponsor. The Sponsor, Forchn Holdings Group Co Ltd., is a well-established operator of port facilities in China with over 20 years of experience.

It has both constructed and operated the Chongxian Port facility - a key construction project duly recognised by the China government. Alongside partners Alibaba Group, Fosun Group, and other key logistics companies, the Sponsor was also one of the founding members of Cainiao Network Technology Co., Ltd. (菜鸟网络科技有限公司).

Right time, right industries. China has quickly emerged as a global leader in e-commerce with the rise of technology. This inevitably translates into demand for e-commerce logistics assets, which represent 40% of ECW’s portfolio.

Demand is further amplified with insufficient supply, especially in Hangzhou, one of the largest e-commerce hubs in China, where some of the largest online retail platforms, including the Alibaba Group, are headquartered.

With support, too, from the Chinese government to propel the e-commerce and technology space in the coming years, we believe that ECW’s assets are well-positioned to capture the vast growth opportunities.

Valuation & Action
We initiate coverage on ECW with an OUTPERFORM recommendation. Our target price of SGD$0.84 represents a total upside of 23.4%, inclusive of FY20F dividend yield of 9.1%.

We used the DDM methodology for the valuation with a cost of equity of 9.7% and terminal growth rate of 1.5%.

ECW currently trades at a FY19F/FY20F P/B ratio of 0.9x, a 25% discount to the average of its peers at 1.2x.


Key Risks
Key risks include high dependency on its sponsor for rental income; non-renewal of upcoming lease expiry with China Tobacco Zhejiang Industrial Co., Ltd.; CNY/SGD currency fluctuations given current geopolitical tensions; and a relatively higher gearing.


Full report here.

Peers ECW 11.19Source: EC World REIT presentation (Nov 2019)


Share Prices

Counter NameLastChange
AEM Holdings1.930-0.020
AusGroup0.030-
Avi-Tech Electronics0.400-
Best World Int.1.360-
CEI0.955-0.005
China Sunsine0.505-0.005
CNMC GoldMine0.250-0.005
CSE Global0.525-0.010
Eagle HTrust USD0.515-0.020
Food Empire0.605-
Golden Energy0.162-
GSS Energy0.080-0.001
ISDN Holdings0.2200.005
ISOTeam0.2450.005
JB Foods0.645-
KSH Holdings0.440-
Miyoshi0.034-
Moya Asia0.065-0.002
Nordic Group0.275-0.005
Oxley Holdings0.3600.005
Procurri0.450-0.005
REX International0.169-0.005
Riverstone0.970-0.005
Roxy-Pacific0.395-
Sing Holdings0.395-
SingMedical0.295-
Straco Corp.0.670-
Sunningdale Tech1.280-0.010
Sunpower Group0.5600.010
The Trendlines0.089-
Tiong Seng0.200-
Uni-Asia Group0.7550.010
Yangzijiang Shipbldg1.1100.010

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1542 guests and no members online