Viva Industrial Trust (VIT) is a Singapore-focused REIT which primarily invests in business parks and industrial real estate assets. The combined market valuation of VIT’s portfolio is S$1.2b, including its latest acquisition of 30 Pioneer Road in April, with the majority in business park assets (58.1%).
Looking ahead, we project VIT’s distributable income to increase by 27.0% in FY16 and 6.2% in FY17. DPU is expected to decrease 1.2% to 6.916 S-cents in FY16, before increasing 6.9% to 7.392 S-cents in FY17.
We value VIT using the dividend discount model (DDM) and derive a fair value estimate of S$0.75 (cost of equity: 9.0%; terminal growth rate: 0%). Based on yesterday’s closing price of S$0.705, VIT is currently trading at a forward FY16F DPU yield of 9.8% and a FY17F yield of 10.5%.
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