Viva Industrial Trust - OCBC Investment 2017-10-30: Strong Set Of Results

Viva Industrial Trust - OCBC Investment 2017-10-30: Strong Set Of Results VIVA INDUSTRIAL TRUST T8B.SI

Viva Industrial Trust - Strong Set Of Results

  • 3Q17 DPU increases 5.0% YoY.
  • Further DPU growth ahead.
  • FV increases to S$0.90.

3Q17 results within expectations 

  • Viva Industrial Trust’s (VIT) strong set of 3Q17 results were within expectations. 
  • 3Q17 revenue increased 16.8% YoY to S$28.3m, mainly due to additional contributions from 6 Chin Bee Avenue and VBP. 3Q17 NPI increased 18.3% YoY to S$20.6m. 3Q17 DPU increased 5.0% YoY to 1.9 S cents, or 24.8% of our full-year forecast.

Look forward to UE Bizhub and VBP 

  • We note that the Downtown Line Station at Expo opened on 21 Oct 2017 as anticipated, and believe that the better accessibility now afforded at UE Bizhub will be a positive rental reversion catalyst. In addition, the asset has been hosting activities and promotions to bolster footfall.
  • Furthermore, we continue to see upside potential for VBP given that only 87.3ppt of the 96.2% committed occupancy for “white space” contributed to 3Q17 income. The asset clocked an average monthly footfall of 432k in 3Q17 and recorded a 19% increase in carpark income from 2016.

Maintain HOLD 

  • VIT’s portfolio occupancy stands at a healthy 90.9% at 30 Sept 2017, up from 88.6% as at 30 Sept 2016. The manager has secured 108k sqft of new leases to date and renewed 287k sq ft of leases, representing 67% of the total leases due for renewal this year. 
  • We note that gearing leans towards to the high side relative to the REIT average of ~35%, with gross borrowings over total assets standing at 39.6% with 83.9% of the interest rate exposure fixed as at 30 Sept 2017.

Weighted average land lease by valuation is 33.9 years. 

  • As we roll our estimates forward and adjust our assumptions, our fair value increases from S$0.895 to S$0.90. VIT currently enjoys an FY17F yield of 7.9% and FY18F yield of 8.0%. As mentioned in our 2 May 2017 report, the tax ruling is another positive catalyst on the horizon for VIT. 
  • We estimate that a ruling in VIT’s favor will add a further 0.5 S cents to our fair value.
  • We maintain HOLD on VIT with a fair value of S$0.90.

Deborah Ong OCBC Investment | 2017-10-30
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.90 Up 0.895