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Viva Industrial Trust to gain from potential merger with ESR-REIT: Maybank

Samantha Chiew
Samantha Chiew • 2 min read
Viva Industrial Trust to gain from potential merger with ESR-REIT: Maybank
SINGAPORE (May 16): Maybank Kim Eng is keeping its “buy” rating on Viva Industrial Trust (VIT) with a target price of $1.05.
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SINGAPORE (May 16): Maybank Kim Eng is keeping its “buy” rating on Viva Industrial Trust (VIT) with a target price of $1.05.

The trust on Tuesday reported 1Q18 distribution per stapled security (DPS) dropped 0.9% to 1.838 cents, compared to 1.854 cents in 1Q17.

The decline was mainly due to all of the management fees payable to the managers of VIT for 1Q18 being paid in cash, instead of a combination of cash and VIT stapled securities. This was partially offset by the release of all the previously retained distributable income of $1.8 million arising from the Jackson Square Rental Support Settlement.

Without these, 1Q18 DPS would have been 4.9% higher at 1.945 cents.

1Q18 gross revenue grew 4.8% to $28.7 million, from $27.4 million a year ago, on the back of higher rental and other contribution from 6 Chin Bee Avenue, Viva Business Park (VBP), and UE BizHub East (UEBH).

Net property income (NPI) rose 3.5% to $21.1 million in 1Q18, from $20.3 million a year ago.


See: Viva Industrial Trust sees 0.9% dip in 1Q DPS to 1.838 cents

Despite these improving fundamentals, the recent share price weakness suggests investors are awaiting the details and outcome of its discussions with ESR-REIT to potentially merge.


See: ESR-REIT announces merger plans with Viva Industrial Trust

In a Wednesday report, analyst Chua Su Tye says, “We believe discussions are at an advanced stage based on market reports.”

Bloomberg on April 28 reported that both parties have reached an agreement on the key terms and are awaiting final regulatory approvals.

“We continue to see benefits from a consolidation with scale potentially lowering borrowing costs, and for Viva it will gain an overseas acquisition growth pipeline with E-Shang Redwood as sponsor,” adds Chua.

In addition, the trust’s core business park and high-specs light industrial assets continued to gain fresh tenancies from ‘new economy’ businesses, including the commitment by a new digital technology tenant to lease an entire floor at Viva Business Park (Block E).

Meanwhile, the completion of a vehicular link connecting 30 Pioneer Road to the adjoining property at 39 Benoi Road has resulted in improved all-level access following the former’s conversion into a ramp-up logistics facility.

As at 1.45pm, units in VIT are trading at 88 cents, giving the stock a FY18 price-to-book ratio of 1.1 and a DPU yield of 7.8%.

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