Viva Industrial REIT

Viva Industrial REIT: 2Q14 results outperformed its own IPO forecast in all aspects. Dividend of 1.723 cents per stapled security was declared, representing 8.5% yield which is attractive among peers. NAV per stapled security is 75.4 cents. Revenue came in at $15.2m, 6.4% above IPO forecast, driven by highly positive rental reversion at UE BizHub East but partially offset by subpar rental contribution from Technopark@Chai Chee. NPI at $10.2m beat forecast by 10.2% but lower down the income statement, distributable income and distribution per stapled security beat IPO forecast by only 0.4% and 0.3% at $10.3m and 1.723 cents respectively. Occupancy improved across its four properties with full occupancy at the hotel component of UE BizHub EAST and Mauser Singapore. However, average occupancy is only 73.1% dragged down by low occupancy of 63.4% at Technopark@Chai Chee, which account for 63.1% of portfolio GFA. There are AEI plans for 21-year old Technopark@Chai Chee. There is near-term earnings visibility as more than 70% of leases by gross rental income expire in FY16 and beyond. WALE is 3.6 years by gross rental income. Balance sheet figures, however, are less impressive than most of its peers. Aggregate leverage at 38.5% gives little debt headroom for acquisitions and interest rate exposure is only 78.5% hedged leaving it highly susceptible to increased cost of debt. Weighted average cost of debt is 3.5% and weighted average maturity is 2.8 years. No refinancing is due in 2014 and 2015. Trading at 1.08x P/B, we see limited upside on the counter and remain circumspect on its ability to continue outperforming its own earnings forecasts.