Viva Industrial Trust’s (VIT) 2Q16 results met our expectations. DPU came in 5.4% lower YoY at 1.750 S cents, making up 25.3% of our fullyear forecast. Gross revenue increased 31.3% YoY to S$23.4m and net property income increased 41.0% to S$17.2m, meeting 22.1% and 26.8% of our full-year estimates.

Revenue increased on the back of additional rental contribution from HFB, 11 Ubi Road 1, and 30 Pioneer Road, as well as additional income from Viva Business Park (VBP). Occupancy at VBP has increased from 66.6% as at 1Q16 to 70.2% as at 2Q16. Distributable income increased 28.8% YoY to S$15.1m. Gearing ratio stands at 40.0% with an all-in borrowing cost of 3.95%.

We place our BUY rating and fair value of S$0.75 under review, pending more details from the analyst briefing later.

Source: OCBC Research - 27 Jul 2016