• 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.

Source: OCBC Research - 30 Oct 2017