SINGAPORE (March 2): Despite the outbreak of the novel coronavirus in China, KGI Securities continues to rate EC World REIT as “outperform”, albeit with a lower target price of 82 cents from 84 cents, previously.
The brokerage says it is “confident” that most of the REIT’s e-commerce assets in China will “perform as expected”.
The full-year contribution of Fuzhou E-Commerce is also expected to offset any potential decreases in revenue from its other assets, it adds.
“To date, Wuhan Meiluote is the only asset that has not yet received the green light to resume operations,” KGI analyst Amirah Yusoff writes in a note dated March 2.
“Outside of Hubei, Wuhan, management has conveyed that the virus spread is somewhat under control, and business is slowly normalising,” she adds.
Still, KGI has reduced its forecasts for EC World REIT given its view of potential stagflation in China.
It notes that the temporary closures of warehouses and factories will inevitably affect Chinese businesses, which will have a direct impact on one-to-two months of cash flows.
KGI says it has factored in the possibility of EC World REIT providing up to a month of rental rebates, especially for its port logistics assets.
As at 3.22 pm, EC World REIT was unchanged at 70.5 cents, with some 1.3 million units changed hands.
