The Negatives
Most of EC World Reit's Properties leases have either Single to 2 tenants. In my opinion, this could be a risk. Even though, the occupancy rate could be 100% due to single tenant renting the whole property, if the tenants decides not to renew leases, the occupancy rate for that property could be also be down to 0%.
The lease expiry profile for FY2020 is too high. If a Master Lease tenant decides not to renew lease, we could see a significant drop in DPU. I prefer Reits with staggered lease expiry. Hopefully EC World Reit would make new acquisitions before FY2020.
As I have highlighted earlier in Part 2, EC World Reit is currently distributing 100% distributable income this year. The distributable income would drop to 90% next year. However, this could also happen to other Reits during their first year of listing where the distribution is 100% but drops to 90% later.
Last but not least, the Reit only started in 2016. There is a lack of track record for this Reit.
My Verdict
As I have mentioned in my older Post on EC World Reit, I have difficulty calculating the dpu of this Reit. Therefore, I would based the dividend yield on the information provided by the website. When the share price was $0.80, the yield was 7.6%. Current share price as at 21 July Closing was $0.77. Therefore current yield should be above 7.6%.
In my opinion, the positive points outweigh the negative points. At current dividend yield, this is a yield which I am happy with. I also feel there's still huge growth potential for e-commerce in China and other parts of the world. I boarded the boat last week while it is still in the port. 😀
Disclaimer: This post is not a buy or sell recommendation. Please do your own research and analysis before buying any stocks.
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