The final REIT in my long-term investment portfolio (you can check out a list of all the companies I’ve invested in, along with reasons why I’ve made the investment decisions here), EC World REIT (SGX:BWCU), released its financial results for the fourth quarter, as well as for the full-year ended 31 December (i.e. FY2021) after market hours yesterday (23 February 2022.)

For those who are not familiar with the REIT, at the time of writing, it has a total of 8 properties used for e-commerce, supply-chain management, and logistics purposes, with all of them located in the People’s Republic of China (PRC.) Currently, this is the only REIT that I have in my long-term investment portfolio that does not have any properties located in Singapore, where it is listed.

In the rest of this post, you’ll find my review, along with my thoughts, about the REIT’s latest financial results, portfolio occupancy and debt profile, along with its distribution payouts to unitholders:

Financial Performance (Q4 FY2020 vs. Q4 FY2021, and FY2020 vs. FY2021)

In this section, you’ll find the REIT’s financial performance both on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2020 vs. Q4 FY2021), and also on a year-on-year (y-o-y) basis (i.e. FY2020 vs. FY2021):

Q4 FY2020 vs. Q4 FY2021:

Q4 FY2020Q4 FY2021% Variance
Gross Revenue
(S$’mil)
$29.5m$31.9m+8.2%
Property Operating
Expenses (S$’mil)
$2.3m$3.1m+34.4%
Net Property
Income (S$’mil)
$27.2m$28.8m+5.9%
Distributable Income
to Unitholders
(S$’mil)
$11.5m$12.4m+8.2%

Both the REIT’s gross revenue and net property income saw single-digit percentage improvements compared to the same time period last year (i.e. Q4 FY2020), which can be attributed to positive straight-line adjustments, as well as the strengthening of the Chinese Renminbi (RMB) by 4.4% (in RMB terms, its gross revenue and net property income would have been up by 3.6% and 1.4% respectively.)

Its distributable income to unitholders also saw a 8.2% q-o-q increase mainly due to a payment of 100.0% of the amount available for distribution for the current quarter under review, compared to a 10.0% retention of distributable income in Q4 FY2020.

FY2020FY2021% Variance
Gross Revenue
(S$’mil)
$109.7m$125.5m+14.4%
Property Operating
Expenses (S$’mil)
$9.4m$12.5m+32.3%
Net Property
Income (S$’mil)
$100.3m$113.0m+12.7%
Distributable Income
to Unitholders
(S$’mil)
$43.1m$50.6m+17.4%

On a full-year basis, the REIT’s gross revenue and net property income both saw improvements (in fact, the REIT’s gross revenue and net property income have continued to record growth every single year since its first full-year post-IPO results in FY2017) – this time round, the improvements in both of these financial results is due to the absence of one-off rental rebates provided to tenants affected by Covid-19 pandemic the first quarter of the previous financial year, along with the strengthening of RMB (in RMB terms, its gross revenue and net property income were up by 9.8% and 8.2% respectively.)

Also, the 17.4% y-o-y improvement in its distributable income to unitholders is mainly due to the absence of rental rebates given out in Q1 FY2020, along with the release of distribution previously retained in Q4 FY2019, Q1 FY2020, Q2 FY2020 (partial) in Q2 FY2021. Also, for FY2021, in view of the Covid-19 rental rebates given in FY2020 that results in a lower distribution per unit, the Manager have proposed to make a voluntary one-off waiver amounting to S$0.8m of its entitled performance fees to the extent of rental rebates provided in FY2020.

Portfolio Occupancy (Q3 FY2021 vs. Q4 FY2021)

Next, let us take a look at the China-based logistics REIT’s portfolio occupancy profile recorded for the current quarter under review (i.e. Q4 FY2021 ended 31 December 2021), compared against that recorded in the previous quarter 3 months ago (i.e. Q3 FY2021 ended 30 September 2021) to find out whether or not it has continued to remain resilient (just like in the previous quarter where its portfolio occupancy was at 99.0%):

Q3 FY2021Q4 FY2021
Portfolio Occupancy
(%)
99.0%99.2%
Portfolio WALE (by
Gross Rental Income – Years)
2.8 years2.7 years

My Observations: Personally, I felt that the REIT’s portfolio occupancy have continued to remain resilient compared to the previous quarter – all of the REIT’s properties are 100.0% occupied except for Wuhan Meiluote, which is 84.7% occupied as at 31 December 2021.

In the coming FY2022 ahead, 8.1% of the leases (by gross rental income) will be expiring, with another 10.8% of the leases expiring in FY2023. However, a huge bulk of the leases (76.6% of them) will be expiring in FY2024 – as a unitholder, I’ll be monitoring this situation very closely, because depending on whether or not the leases will be renewed, and also if they will be renewed at favourable terms (to the REIT), its financial performance down the road then will be positively or negatively impacted.

Debt Profile (Q3 FY2021 vs. Q4 FY2021)

Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be looking at its debt profile by comparing the statistics recorded for the quarter ended 31 December 2021 (i.e. Q4 FY2021) against that recorded in the previous quarter ended 30 September 2021 (i.e. Q3 FY2021) to find out whether or not it has improved, remained more or less the same, or deteriorated:

Q3 FY2021Q4 FY2021
Aggregate Leverage
(%)
37.9%38.2%
Average Cost of Debt
(%)
4.0%4.1%

My Observations: While the REIT’s debt profile have continued to remain stable (particularly, its aggregate leverage, at 38.2%, still provides some debt headroom before the regulatory limit of 50.0% is reached), but 2 things to take note here – first it is that the interest coverage ratio (as at 31 December 2021) is at 2.92x, which is one of the lowest among the Singapore-listed REITs; second, I noticed that the weighted average debt maturity is at 0.63 years – meaning to say that the REIT’s debts will all be expiring within the coming year ahead. That said, I understand that the REIT have commenced refinancing plans and will provide updates if there are any material developments – I will continue to keep tabs on this.

Distribution Payout to Unitholders

EC World REIT is one of the few Singapore-listed REITs that have continued to declare a distribution payout to its unitholders on a quarterly basis – so for those who are looking to invest in REITs that pays out a distribution in such a time frequency, this logistics REIT is one you can have a look at (having said that, please do your own diligence before you make any investment decisions, as a REIT’s distribution payout frequency is not the only metric you should look at.)

For the current quarter under review, the REIT’s management have declared a distribution payout of 1.537 cents/unit – a 7.7% improvement compared to the payout of 1.427 cents/unit in Q4 FY2020.

Together with its distribution payout declared for the current quarter under review, its full-year payout amounts to 6.263 cents/unit – again, this is an improvement of 16.9% compared to the REIT’s full-year payout of 5.359 cents/unit in FY2020.

If you are a unitholder of the logistics REIT, please take note of the following dates regarding its distribution payout:

Ex-Date: 14 March 2022
Record Date: 15 March 2022
Payout Date: 31 March 2022

Closing Thoughts

While the REIT’s financial performance (both on a q-o-q, as well as on a y-o-y basis) have continued to remain stable, but as a unitholder, I am concerned about its portfolio occupancy (where more than 80.0% of the leases will be expiring in FY2024, and depending on whether the leases are renewed on favourable terms (or not), it will directly impact its financial performance in the financial years thereafter), as well as its debt profile (where the average term to debt maturity is at 0.63 years as at 31 December 2021 – meaning its borrowings will be maturing in the coming financial year ahead) – both of them I’d be keeping a close watch on and seeking an update from the REIT’s management in its coming annual general meeting (AGM) ahead, if no there are no further mentioning from now till then.

With that, I have come to the end of my review of EC World REIT’s latest ‘report card’ for the fourth quarter, as well as for the full-year 2021. As usual, please note that everything you’ve just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. You’re strongly encouraged to do your own due diligence before you make any investment decisions.

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