Riding on E-commerce Boom

With the growth of e-commerce, consumers can now buy whatever they want from the comfort of their home. The cross-border trade not only break down the boundaries across nations to integrate goods and services around the world, it also creates opportunities for the countries and regions related to belt and road. EC World REIT is one organization to benefit from the trade globalization. ShareInvestor caught up with Mr Goh Toh Sim, CEO of EC World Asset Management Pte. Ltd. (Manager of EC World REIT) to understand more on the strategic direction for 2H2019 and beyond.

The e-commerce portfolio under EC World REIT has increased significantly in the past 1 year. What led to the strategy to increase exposure in e-commerce logistics and the most recent buy of 214,284 sqm property in Fuzhou?

The e-commerce sector has grown exponentially in the last decade, especially China where it has become a way of life and the global e-commerce scene is expected to further grow by another USD2.51 trillion by 2020 with China’s market increasing from 43% - 59%. While the online marketplaces have been dominated by large technology companies such as Alibaba and JD, the underlying infrastructure market which supports the fulfilment process remains under supplied and fragmented. As such, there are great opportunities in this space, and we are generally optimistic on the outlook and demand of such quality e-commerce warehouse space.

EC World REIT’s sponsor, Forchn Group, was one of the founding shareholders of the Cainiao Network, Alibabaled logistics platform. The Group also owns leading e-commerce fulfillment services provider, Ruyicang who operates in 30 warehouses in 25 cities of China as at end 2018 providing the REIT with a captive tenant for our e-commerce logistics assets.

As such, it is a natural extension for the REIT to acquire quality logistics assets suitable for e-commerce fulfillment.

How does EC World remain competitive in the highly disrupted sector of e-commerce?

The REIT has a symbiotic relationship with the Sponsor whereby the Sponsor’s private funds and logistics operations (Ruiyicang) provide the fundamentals of growth for the REIT.

Capitalizing on the Sponsor’s capabilities and network, EC World REIT is able to achieve stable revenue streams and visible cash flows, robust pipeline of acquisition assets and assured occupancy for further acquisitions.

With much uncertainty due to the constant trade tensions, how well positioned is EC World to manage the threats?

The financial and operating performance of EC World REIT’s assets continue to be strong due to its defensive lease nature with built-in escalations. The nature of the assets’ underlying business and stickiness of the tenants in the REIT’s specialized logistics asset in Hangzhou are unaffected by the current macroeconomic situation while the port logistics assets serve domestic businesses within Hangzhou with no international trade exposure.

Similarly, the EC World’s e-commerce assets are also focused on the domestic market demand and e-commerce growth in Hangzhou and Wuhan which are still enjoying healthy double-digit growth.

The Manager also proactively monitors the market, undertake active asset management to mitigate any fluctuation as well as undertake prudent capital management to manage the FX and interest rate exposures.

Under SGX, there are a few china focused REITs like BHG, Sasseur and yourself. Why should a retail investor choose to invest in EC World REIT?

EC World REIT is the only Chinese specialized and e-commerce logistics REIT listed on SGX-ST. It is also the only S-REIT with substantial exposure to the e-commerce logistics segment. For investors who want to be exposed to the fast-growing e-commerce logistics sector in China, EC World REIT is the best proxy.

Are there more acquisitions in the pipeline? What can retail investors expect of EC World REIT in the next 12 months?

The Manager embarks on a disciplined investment approach and actively sources acquisitions with for yield accretive-ness being the most important criteria. Having said that, we will continue to focus on our core in China and may explore potential opportunities in Southeast Asia as well.

In terms of pipeline, the Sponsor has various private funds with targeted AUM of US$1.2bn and this will form an important source of pipeline for the REIT in the medium and long term. However, we are not restrictive to just acquiring Sponsor assets, we are open to looking at third party acquisitions as well.

 

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