Excerpts from analyst's report
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Long term leases to minimise earnings cyclicality
Viva has six properties in Singapore: two business parks at 72% of 1Q15 revenue, two factories (15.9%), one hotel (at 9.9%), and one warehouse (2.2%). Total NLA is 2.3m sf with a gross development value of SGD850m. With a weighted average land lease of 40.6 years and 69% of income locked in with rental support and longterm master leases, market views Viva as a defensive play through late 2018 amidst the backdrop of a glut in industrial capacity.
With potential growth to boot
Management has updated that planned asset enhancement at Technopark @ Chai Chee (31% revenue), will help anchor FY16 DPS growth. AEI will entail conversion of under-utilized carpark and business-park space into retail space. An anchor tenant agreement has since been signed with Decathlon, a global sports innovator and retailer. With AEI expected to complete by 4Q15, management believes that Technopark’s retail space and improved facilities will also have the potential to lift business-park occupancy as well as rental reversions.
FY16-17 yields could expand to 9.0-9.9%
A SGD70m fund-raising exercise is expected in the near future. Even if we factor in potential dilution, investors could be looking forward to yields expanding from the current 8.4% in FY14 to 9.0- 9.9% range by FY16-17 – this compares favourably against the current industrial SREIT sector of 6.5%. From FY19 onwards, yields are likely to dip to 9.0-9.3% as rental support for UE Biz Hub East ceases.
