RHB started EC World REIT at Buy with a S$0.81 target price, saying the REIT is a proxy to China’s e-commerce and logistics growth via its seven logistics assets on the mainland.
“With booming e-commerce growth (last three years: 30-40 percent p.a.) and limited good quality logistics assets in China, we believe the REIT’s assets are well-positioned in future growth segments,” RHB said in a note this week.
“As its properties largely cater for domestic consumption, we see minimal impact from the U.S.-China trade war and could potentially benefit from the government’s push to boost domestic growth,” it added.
RHB noted that 70 percent of the REIT’s income s backed by master leases from its sponsor, Forchn, which the brokerage expected would continue beyond the current term ending 2020.
Forchn also has an agreement with YCH giving it the option to acquire YCH’s 13 logistics properties in Southeast Asian and China, which presents attractive growth opportunities, RHB said.
EC World REIT is the cheapest logistics Singapore-listed REIT, with a 9 percent yield, around 230 basis points above the industrial REIT average, and trading at 0.8 times price-to-book value, RHB said.
EC World REIT last traded at S$0.70.