They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership.  They are in their 30s and,...

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EC World REIT.

Tuesday, April 10, 2018

Reader says...
What do you think of EC World REIT?



AK says...
EC World REIT, I looked at it and was in the process of blogging about it but, somehow, it joined the ranks of half finished blogs. I have about 400 of these. Terrible, I know.

Looking at that half finished blog, I remember I was concerned about the relatively short land leases, similar to most Singapore industrial land leases and the relatively low distribution yield.





The yield was 7% or so and this was because it was bolstered by the sponsor as well. Without the sponsor's support, the yield would have been much lower. Less than 6%.

Still, the sponsor accounted for two thirds of the REIT's income. Real concentration risk.

There was also something about having debt denominated in S$ which I didn't like. I would have liked for all the debt to be in RMB which would give them a natural currency hedge.





Also, I didn't like that a port was such a substantial part of the the REIT's portfolio. Quite the opposite of e-commerce.

It just didn't seem rewarding enough for the risks we must bear.

I would demand a much higher yield for something like this.






Just being promising is not good enough. Whether I am being compensated sufficiently is more important and this brings to mind my PCRT story.

This is just me talking to myself, of course. ๐Ÿ˜‰

Related post:
PCRT: Full divestment.

5 comments:

joe lee said...

Hi Ak,

Sorry to ask u such a noob question but can i ask how does the debt being in RMB give them a natural currency hedge.?

AK71 said...

Hi Joe,

Some homework for you.

Read this for clue:
Gearing ratio and margin of safety.

AK is lazy. ;p

Ming-jie Chai said...

Hi AK

I actually view the SGD-denominated debt as being good for EC World Reit.

This is based on the likely appreciation of the RMB against the SGD. Indeed, we are already seeing that the RMB has appreciated against the SGD in recent times and, going forward, I believe this trend will continue given international pressure on CN to reduce trade deficits. It also seems like a stronger RMB and weaker foreign currency vis-a-vis the RMB (e.g. USD) might be one of the solutions to soften trade tensions.

I am quite heavily vested in EC World Reit. And thanks for sharing your views. :)

Cheers

AK71 said...

Hi MJ,

All of us have opinions as to what might happen in future but that is in the realm of speculation.

Opinions are different from facts and the fact is that having debt in RMB for RMB assets provides a natural currency hedge.

Hedging against FOREX risk is costly but, to be fair, as long as S$ denominated debt remains relatively small, it should not be too much of a burden for the REIT.

Thanks for sharing your thoughts.

AK71 said...

Reader says...
Morning. I was looking at EC world Reits. It has Low gearing , low price to book and relatively high dividend. Current price of 0.71 is also below their IPO. Just wondering about your views on this stock. Am I missing out on critical information?

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