EC World REIT (SGX:BWCU) released its results for the first quarter of the financial year 2020 ended 31 March 2020 yesterday evening (12 March.)

As a unitholder of the REIT, I have studied its latest results and in this post, you will find key updates to take note of (especially if you are also a unitholder of the REIT), along with my personal thoughts to share:

Key Financial Highlights (Q1 FY2019 vs. Q1 FY2020):

The following table is EC World REIT’s latest financial results (i.e. Q1 FY2020), compared against its financial results for the same quarter last year (i.e. Q1 FY2019):

Q1 FY2019Q1 FY2020% Variance
Gross Revenue
(S$’mil)
$23.9m$23.5m-1.4%
Property Operating
Expenses (S$’mil)
$2.7m$2.4m-10.3%
Net Property
Income (S$’mil)
$21.2m$21.1m-0.2%
Distributable
Income to Unitholders
(S$’mil)
$11.9m$9.3m-22.0%

Gross revenue edged down 1.4% on a year-on-year (y-o-y) basis due to recognition of one-off rental rebates, totalling RMB23.7mil (given to tenants in its portfolio, as announced on 03 April 2020, to mitigate the adverse impacts of Covid-19 situation on their tenants’ operations), offset by full quarter revenue contribution by Fuzhou E-commerce (acquired in August 2019), and organic escalations. However, in RMB-terms, the REIT’s gross revenue would have been up by 0.1% on a y-o-y basis.

Similarly, while the REIT’s net property income recorded a 0.2% y-o-y decline in SGD-terms, it recorded a 1.2% y-o-y improvement in RMB-terms.

Finally, the 22.0% y-o-y fall in the REIT’s distributable income to unitholders was due to rental rebates provided to tenants in March 2020, along with the REIT retaining 5% of the amount available for distribution for the sake of prudence and maintaining financial fluidity.

My Thoughts: As the first quarter (between 01 January and 31 March 2020) encompasses the period where China a lockdown to curb the spread of Covid-19, I had expected a weaker set of performance compared to the same period last year. Also, the drop in the REIT’s distributable income to unitholders was also within my expectation.

Moving forward, as China slowly resumes its normal operations, and that from the REIT’s presentations, I learned that the REIT’s tenants in all its assets have also resumed operations as at 31 March 2020, I would expect the REIT’s financial performances to also gradually improve in the quarters ahead.

Debt Profile (Q4 FY2019 vs. Q1 FY2020):

Moving on, let us take a look at the REIT’s debt profile, where I will be comparing its latest debt profile for the quarter ended 31 March 2020 (i.e. Q1 FY2020), with its debt profile recorded in the previous quarter ended 31 December 2019 (i.e. Q4 FY2019), to find out if it has improved or deteriorated:

Q4 FY2019Q1 FY2020
Aggregate Leverage
(%)
38.7%38.6%
Average Cost of Debt
(%)
4.5%4.3%

My Thoughts: There was a slight reduction in the average cost of debt (by 0.2 percentage points compared to three months ago.) As a result, the REIT’s aggregate leverage also inched down a little.

Portfolio Occupancy Profile (Q4 FY2019 vs. Q1 FY2020):

Just like the REIT’s debt profile, I will also be comparing its portfolio occupancy profile reported for the quarter (i.e. Q1 FY2020) against the previous quarter (i.e. Q4 FY2019) to find out if it has remained resilient:

Q4 FY2019Q1 FY2020
Portfolio Occupancy
(%)
99.97%99.1%
Portfolio Average Lease
Expiry (by Gross Rental
Income) (years)
4.1 years3.8 years

My Thoughts: While there was a slight drop in both its portfolio occupancy and weighted average lease expiry (or WALE in short) compared to the previous quarter ended 31 December 2019, they are still higher than the average for industrial S-REITs (the average portfolio occupancy for industrial S-REITs was 90.8%, while the portfolio WALE for industrial S-REITs was 3.8 years.)

Additionally, I learned that in terms of the REIT’s WALE by gross rental income, only 15.2% of the leases will be expiring in FY2020, and 10.2% in FY2021, with the remainder (74.6% of the leases) expiring in FY2022 and beyond.

Distribution Payouts for the Quarter under Review (i.e. Q1 FY2020):

Due to a 22.9% decline on a y-o-y basis in the REIT’s distributable income to unitholders, the REIT’s distribution per unit to unitholders for the current quarter under review is 1.158 Singapore cents/unit (down by 22.9% compared to 1.501 Singapore cents/unit declared in Q1 FY2019.) Excluding the rental rebates, its distribution per unit to unitholders would have been 1.529 Singapore cents/unit.

The REIT will be going ex-distribution on 12 June, with the record date on 15 June, and payout on 26 June.

Summary of the REIT’s Press Release:

  • In the first quarter, businesses in China were affected by the lockdown and extension of Spring Holidays imposed by the Chinese government to contain the spread of Covid-19.
  • While the Covid-19 situation has stabilised and improved in China with economic activities and production resuming gradually, the REIT’s Executive Director and CEO Mr Goh Toh Sim cautioned that significant macroeconomic uncertainties are likely to persist in the near-term and as such, for the sake of prudence and maintain financial fluidity, the REIT have decided to retain 5% of its amount for distribution in Q1 FY2020.
  • Moving forward in the remaining quarters of FY2020, the REIT will continue to work to optimise portfolio performance.

Announcement – Removal from Quarterly Reporting List:

In a separate note published on the same day (i.e. 12 May), the REIT updated that the Singapore Exchange Securities Trading Limited (“SGX-ST”) have removed it from the list of issuers who are required to perform mandatory quarterly reporting as at 07 May 2020, as the issue relating to material uncertainty relating to EC World REIT’s going concern has been resolved as a result of the REIT’s completion of its refinancing exercise during FY2019.

Moving forward, the REIT will determine at a later stage whether it will cease quarterly reporting and instead announce its financial statements on a semi-annual basis.

You can read the note in full here.

Annual General Meeting (AGM) for FY2019:

At the time of writing, I do not have any further information regarding when the REIT will be conducting its AGM for FY2019.

I will provide an update on The Singaporean Investor’s Telegram broadcast group (you can follow the latest updates here), as well as on my InvestingNote profile page (you can follow me here) as soon as I have them.

In Conclusion:

On the whole, I am satisfied with the REIT’s latest set of results. I am confident of the REIT’s gradual recovery in terms of its financial performance in the coming quarters ahead as normal business activities resumes in China.

Download Related Documents Relating to the REIT’s Latest Q1 FY2020 Results Below:

Disclaimer: At the time of writing, I am a unitholder of EC World REIT.

 

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