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Latest Earnings From Viva Industrial Trust: Looking Forward To Growth Ahead

Viva Industrial Trust (SGX: T8B) released its fiscal third-quarter earnings (for the three months ended 30 September 2016) last Friday.

As a brief background, Viva Industrial Trust is a stapled trust that focuses on business parks and industrial properties in Singapore. The trust now has a portfolio of eight business parks, logistics properties, and light industrial properties that are valued at S$1.187 billion collectively.

With that, let us dive into the trust’s results.

Financial highlights

The trust’s quarterly revenue leapt by 31.9% from a year ago to S$24.2 million. Net property income surged 39.2% to S$17.4 million as a result. The top-line growth had been bolstered partly by three acquisitions made over the past year.

Viva Industrial Trust’s distributable income also jumped 35.2% year-on-year to S$15.7 million. This resulted in a 9.9% increase in the trust’s distribution per stapled security (DPS) from 1.647 cents a year ago to 1.81 cents. Viva Industrial Trust had issued new stapled securities over the past year to fund its acquisitions, leading to the lower growth rate in DPS.

On the balance sheet, here’s a snapshot:

viva-industrial-trust-balance-sheet-wilson
Source: Viva Industrial Trust earnings presentations

To sum up the important changes in Viva Industrial Trust’s balance sheet, its total borrowings had increased by 26.7% from a year ago due to the need to pay for acquisitions and asset enhancement initiatives. But, growth in the trust’s asset base kept its gearing at about the same level,. REITs in Singapore are required by regulations to keep their gearing under 45%.

Viva Industrial Trust’s weighted average debt maturity has risen to 3.5 years from 2.0 years as the trust refinanced loans coming due in 2016 and 2017 to 2020 and 2021.

The trust’s net asset value (NAV) per stapled security now stands at S$0.803, down by 2.9% from a year ago. At the REIT’s current unit price of S$0.80, it is priced at 1 times book value.

Operational highlights and a future outlook

Viva Industrial Trust’s portfolio occupancy rate rose to 88.6% in the third-quarter of 2016, a substantial improvement from the 80.8% seen a year ago.

In its earnings release, Viva Industrial Trust cautioned about the weak market conditions in the industrial property sector and business park sector:

“According to Knight Frank, the industrial property sector continued to face headwinds in most industries and sectors, putting further pressure on both industrial space rentals and prices in 3Q2016. As a result, overall island-wide industrial rents softened further in 3Q2016 and rentals have dropped across most locations.

For the business park sector, rentals moderated downwards in 3Q2016 due to the effects of the challenging business climate as tenants remain cautious on their business space needs.”

But, it is also worth noting that Viva Industrial Trust has “minimal direct exposure to hard-hit oil & gas energy sectors.” The trust also shared some positive highlights about its prospects:

“The business park sector continued to be resilient in 3Q2016, as business park space that has flexible layout, ready amenities, good connectivity and clustered within established business park zones remains well-occupied. Furthermore, the lack of new supply in business park space in the medium term is expected to be supportive of rentals.

With a business-park focused portfolio – VBP and UE BizHub EAST – that includes infocomm technology companies amongst its key tenants, the REIT Manager believes that the industry trends bode well for VIT in the short to medium term.”

At its current unit price, Viva Industrial Trust has a trailing distribution yield of 8.5%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor, Wilson Ong, doesn’t own shares in any companies mentioned.