Hello there! I believe right now everyone is spooked by the First REIT saga causing a drop in its share price from $0.820 to $0.650 region in a matter of hours on 1st June 2020. The funny thing is that the CEO of First REIT mentioned he does not have knowledge of the announcement made by Lippo Karawaci regarding the lease arrangements. Seems sensitive, shall stop talking about First REIT here.

Upon request to study EC World REIT together
Today, as requested, our focus is on EC World REIT. EC World REIT is the only true-blue logistic REIT listed on SGX. Here is the portfolio of properties owned by EC World REIT:

The REIT owns a few warehouses, logistics properties, and a port. The sponsor is Forchn Holdings Group Co Ltd. It seems like a good and reliable sponsor for the numerous awards it has won. 

Some of the notable awards and accolades which the Sponsor has received are:
Shanghai Famous Brand Award (上海名牌);
Top 100 Private Enterprises in Shanghai 2015 (2015年度上海民营企业100强);
Top 100 Private Science and Technology Enterprise in Shanghai in 2006 (2006年 度上海民营科技企业100); and
Top 10 Zhejiang Returnee Investment Model Enterprise (十大回乡投资模范浙商).

Can the tenants pay the Rents?
Okay, so our key here is whether the REIT's tenants are able to pay off the rents to EC World REIT?
Let us visit the annual report to find out which are the businesses paying rent to EC World REIT.

This is the tenant breakdown by Gross Rental Income in 2018:
Tenant breakdown by Gross Rental Income in 2019:
I have intentionally put 2018 and 2019 tenants breakdown here to show that EC World REIT has become more diversified in terms of tenancy. the top 2 tenants in 2018 has dropped in % contribution of revenue to EC World REIT. from 67.4% in 2018 to 57.2% in 2019.

It may seem like the top 2 tenants are separate. However, I realized upon digging on the net (in Chinese) that both the top 2 tenants are wholly-owned by Forchn Holdings Group.

This is what I found on Forchn website, that includes Hangzhou Fu Gang Supply Chain Co Ltd as part of their "Contacts".

This is found on 51 jobs (a Chinese job portal) that states that Hangzhou Fu Gang Supply Chain Co Ltd is wholly owned by Forchn Holdings.

Translation: Hangzhou Fugang Supply Chain Co., Ltd. is a wholly-owned subsidiary of Fuchun Holding Group. Large-scale comprehensive logistics enterprise.
So, my point is, we should take the main tenant contribution to be 57.2% as per annual report 2019. This is quite significant.

Forchn pays EC World REIT more than 77% of its rents
Being inquisitive, I went to research on Hangzhou Fuyang Yunton E-commerce Co Ltd too. I realised that this is also a subsidiary of Forchn Holdings. 

This is an extract from a company information broker in China:
 Picture shows the entity is 100% owned by a Fu Chun (Forchn) entity:

With Forchn Holdings paying a huge portion of rents to EC World REIT, can they really afford it?
From this news article from their website, Forchn Holdings is a privately held investment holding company established in 1992 with major operations in Hangzhou, China.
As a founding shareholder of Alibaba’s China Smart Logistic Network, also known as Cai Niao Network, and Ruyicang E-commerce Logistics Service, Forchn Holdings owns a robust and broad portfolio in Chinese e-commerce logistics services and warehousing, e-commerce real estate, health & wellness, manufacturing and financial service industries. 
It is also the owner of iconic brands including the luxurious Fuchun Golf Resort in Hangzhou and the elegant 400-year old cutlery brand, Zhang Xiao Quan.

If you visit Forchn's website, it still seems that logistics and real estate sector is their main business.

Its CEO is Zhang Guo Biao. It seems he is the founder of the business, and has a Joint Venture with Alibaba and 7 other companies to create Cainiao, a logistics system that enables parcel tracking as EC World REIT has a huge presence on their website. (subjective to individuals)

Unable to get the financials
Forchn Holdings is a private company, hence I was unable to pull out any concrete financials to prove if it is able to pay the rents to EC world REIT. However, it seems that Forchn is pretty invested in EC World REIT and it does not make sense to hurt EC World REIT share holders, as it would affect themselves also. From below SGX extract, we can see that Forchn owns 43% of EC World REIT.

Furthermore, Forchn Holdings has made an effort to donate Protective equipment during the COVID crisis over to Singapore. See below news excerpt. Link is here.

Back in 2007, Forchn won an award for being an "AAA-rated" business in terms of trustworthiness form Baidu.

Quoting a brokerage report, they seem to have YCH's support with reference to below extract:

To sum up
EC World is still an attractive REIT with all the buzz about growing logistics sector. I would not invest now though, because I prefer diversified tenancies. 77% from "one tenant" is too risky to me.

I do feel that the sponsor Forchn Holdings should be able to pay the rents to EC World REIT. One, they have a good reputation. Two, they have enough cash to start real estate funds with a few other stakeholders. Three, they seem to have connections with JD (one of their tenants of EC World REIT) and Alibaba in forming Cai Niao. 

Once again, I am not an expert. Port business is something I do not understand , as I have had losses from investing into HPH Trust. If you can teach me, let me know :)

Meanwhile, stay safe and watch Llama Finance on Youtube.

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~Mr Llama


  1. The fact that Forchn has a controlling stake in EC may not be a positive. Recently EC gave out ¥23mil in rental rebates to their tenants, almost all (like 90%) of which went to Forchn. Basically, if Forchn can't pay rent, they dont even need to default. Minority holders have no say - EC just goes ahead to cut distributions and give a voluntary rebate, waiving off Forchn's rental.

    1. Didn't know about this.. I guess this can be considered "business synergy"? Thanks for your input! Always good to keep retail investors informed

  2. If Forchn and its subsidiaries continue to hold majority units in ec World REIT, then things will run. However, should one day, Forchn sells away its units, then we need to be more alert. Lippo Karawaci (LPKR) sold away the final batch of its stakes in First REIT and we see LPKR wanting to renegotiate the rental structure today. -CK-

    1. Agreed! Similar to when temasek is trimming their shareholdings in hyflux. Always a good signal of potential trouble


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