After market hours this evening (09 November 2021), EC World REIT (SGX:BWCU) released its financial results for the third quarter of the financial year 2021 ended 30 September 2021.
For those of you who are not familiar with this REIT – here’s some brief introduction – its property portfolio consists of 8 properties (all located in China) used primarily for e-commerce, supply chain management, and logistics purposes. One thing I like about the REIT is that, despite not mandated to release its full financial results on a quarterly basis, the REIT have continued to do so. Also, it is one of the few Singapore-listed REITs that has continued to declare a distribution payout to its unitholders on a quarterly basis (hence, for those of you who like to invest in REITs that pay out a distribution once every four months, it is one you may like to have a closer look at.)
In the rest of today’s post about the REIT’s latest set of results, you’ll read about a review (along with my thoughts) about its financial results, portfolio occupancy and debt profile, along with distribution payouts declared for the current quarter under review.
Let’s begin…
Financial Performance (Q3 FY2020 vs. Q3 FY2021, and 9M FY2020 vs. 9M FY2021)
In this section, you’ll read about the REIT’s financial performance both on a quarter-on-quarter (or q-o-q) basis (i.e. Q3 FY2020 vs. Q3 FY2021), as well as on a year-on-year (or y-o-y) basis (i.e. 9M FY2020 vs. 9M FY2021):
Q3 FY2020 vs. Q3 FY2021:
| Q3 FY2020 | Q3 FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $28.5m | $31.6m | +10.9% |
| Property Operating Expenses (S$’mil) | $2.3m | $3.0m | +27.4% |
| Net Property Income (S$’mil) | $26.1m | $28.6m | +9.4% |
| Distributable Income to Unitholders (S$’mil) | $11.2m | $13.4m | +20.3% |
On a q-o-q basis, the latest set of results is an improved one for the Chinese-based logistics REIT – the 10.9% growth in its gross revenue can be attributable to organic rental escalations and Late Fee Income, along with the strengthening of the Chinese Renminbi.
Also, as a result of a higher net property income, and lower retention ratio of 5% (compared to 9% in Q3 FY2020), its distributable income to unitholders saw a 20.3% q-o-q increase to $13.4m. As far as the retention of 5% of total amount for distribution is concerned, I understand it is for withholding tax payment upon future profit repatriation.
9M FY2020 vs. 9M FY2021:
| 9M FY2020 | 9M FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $80.2m | $93.5m | +16.6% |
| Property Operating Expenses (S$’mil) | $7.1m | $9.3m | +31.6% |
| Net Property Income (S$’mil) | $73.1m | $84.2m | +15.2% |
| Distributable Income to Unitholders (S$’mil) | $31.6m | $38.2m | +20.8% |
Together with q-o-q improvement in its first quarter (you can read a review I have done here), as well as in the second quarter (you can read a review about the REIT’s Q2 FY2021 results here), the REIT’s results for the first 9 months of FY2021 was an improved one compared to the same time period last year.
The improvements in the REIT’s gross revenue is due to the absence of one-off rental rebates provided in Q1 FY2020 in efforts to mitigate the adverse impact of Covid-19 situation on the tenants’ operations, along with the strengthening of the Chinese Renminbi.
Another thing to note is the 20.8% y-o-y increase in its distributable income to unitholders – which is due to the absence of one-off rental rebates given out to tenants in the first quarter of FY2020, as well as the paying out of retained distribution from Q4 FY2019, Q1 FY2020, as well as from Q2 FY2020 (partial) amount of approximately S$2.0m in Q2 FY2021.
Portfolio Occupancy Profile (Q2 FY2021 vs. Q3 FY2021)
When it comes to reviewing a REIT’s portfolio occupancy profile, my preference is always to take a look at the statistics recorded for the current quarter under review, and compare it against the previous quarter to find out whether it has continued to remain resilient or it has deteriorated (and if so, I’ll dive deeper to find out whether if its just a temporary blip, or whether it has been on a downward decline over the past few quarters – and if that’s the case, then its definitely a possible red flag.)
In the table below, you’ll find the portfolio occupancy profile of EC World REIT recorded for the current quarter under review (i.e. Q3 FY2021 ended 30 September 2021) compared against the previous quarter (i.e. Q2 FY2021 ended 30 June 2021):
| Q2 FY2021 | Q3 FY2021 | |
| Portfolio Occupancy (%) | 99.1% | 99.0% |
| Portfolio WALE (by Gross Rental Income -years) | 3.0 years | 2.8 years |
My Observations: All of the REIT’s properties were fully occupied (which is good to note), except for Wuhan Meiluote, which was 79.4% occupied as at 30 September 2021, a slight dip from the 81.3% occupancy rate as at the end of the previous quarter on 30 June 2021 – hence, its portfolio occupancy for the current quarter under review dipped by 0.1 percentage point (pp) compared to the previous quarter.
Also, for the remaining quarter of the current financial year, only 5.9% of the leases are up for renewal, with another 6.9% of the leases expiring in FY2022 – in my opinion, this is pretty minimal.
Debt Profile (Q2 FY2021 vs. Q3 FY2021)
Similar to how I have studied REIT’s portfolio occupancy profile in the previous section, I too will be looking at its debt profile reported for the current quarter under review, and compare it against that reported for the previous quarter 3 months ago, and they are as follows:
| Q2 FY2021 | Q3 FY2021 | |
| Aggregate Leverage (%) | 37.6% | 37.9% |
| Interest Coverage Ratio (times) | 2.86x | 2.91x |
| Average Cost of Debt (%) | 4.2% | 4.0% |
My Observations: Even though the REIT’s aggregate leverage pipped up slightly to 37.9%, but at this ratio, there still remains plenty of debt headroom for the REIT to embark on further yield-accretive acquisitions before the regulatory limit of 50.0% is reached.
Another thing to note is its interest coverage ratio – no doubt it is slightly on the low side (my ideal aggregate leverage ratio for REITs is 5.0x and above), but its good to note that it has improved slightly compared to the previous quarter (this is due to the average cost of debt coming down by 0.2pp to 4.0%.)
Distribution Per Unit
For the current quarter under review, the REIT’s management have declared a distribution payout of 1.662 cents/unit, a 19.7% improvement from the distribution payout of 1.388 cents/unit declared in Q3 FY2020.
If you are a unitholder of the China-based logistics REIT, then you need to take note of the following dates regarding its distribution payout:
Ex-Date: 06 December 2021
Record Date: 07 December 2021
Payout Date: 29 December 2021
Closing Thoughts
In my opinion, the logistics REIT’s latest set of results is a satisfactory one – and very much within my expectations because compared to last year when the pandemic was at its worst and the Chinese government had to impose a blanketed lockdown approach to stop the further community spread of the Coronavirus. However, for the current financial year, normal business activities have more or less resumed.
In terms of its portfolio occupancy, its pretty resilient in my opinion as well. The same can also be said about its debt profile (the only slight negative though is on the low side.)
With that, I have come to the end of my review of EC World REIT’s latest set of third quarter financial results. As always, do take note that all the opinions that you have read about above is purely my own (which I’m sharing for educational purposes only.) You’re strongly advised to do your own due diligence before you engage in any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a unitholder of EC World REIT.
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