Fu Heng Warehouse, one of six properties in EC World REIT's initial portfolio. (Photo: EC World REIT)

Religare Institutional Research has issued a ‘Buy’ rating on China-focused EC World REIT, citing promising growth potential, and strong support from sponsor Forchn Holdings Group.

In an investment report published 2 March, Religare also highlighted China’s appetite for electronic commerce, which has grown by 100% since 2013 to reach RMB3.95 trillion (USD435 million) in 2015, as a factor that bodes well for the industrial REIT.

“With vast growth opportunities in China’s e-commerce space and strong government and sponsor support, [EC World REIT] is well positioned for growth”, said Religare.

“A war chest of RMB1.3 billion [assuming 40% leverage]to fund potential acquisitions gives the REIT ample room to deliver yield-accretive inorganic growth, at an estimated 300,000 + square metres over the next 12-18 months”, said Religare, pointing to the right-of-first-refusal (ROFR) pipeline of two properties from Forchn.

“This, along with strong fundamentals, attractive valuations of 0.8x [price/book value] and an attractive [forecasted]FY17 dividend yield of 7.7%, leads us to initiate coverage on the stock with a ‘BUY’ rating and a target price of SGD0.92”, said Religare.

EC World REIT finished the trading day unchanged from its previous close on the Singapore Exchange at SGD0.70.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.