SINGAPORE (July 26): Religare Capital Markets says Viva Industrial Trust (VIT) is likely to see continued growth ahead, following “another stellar quarter” with multiple growth avenues.
Viva Industrial Trust on Wednesday morning posted a 6.3% increase in distribution per stapled security (DPS) to 1.861 cents for the second quarter ended June
Gross revenue grew 18.0% to $27.6 million in 2Q, from $23.4 million a year ago.
See: Viva Industrial Trust posts 6.3% increase in 2Q DPS to 1.861 cents
“With multiple avenues of growth potential in FY17, we remain confident that our VIT’s DPU will continue to grow in the coming quarters,” Religare analyst Tata Goeyardi says in a sales commentary on Wednesday.
The strong performance was on the back of higher revenue contribution from Viva Business Park (VBP) after the completion of its asset enhancement initiative (AEI).
Also, VIT recorded additional rental contributions from 6 Chin Bee Avenue and 30 Pioneer Road, which were acquired in January 2017 and April 2016, respectively.
“Looking ahead, as VBP continues to deliver strong earnings post-AEI, coupled with full quarter contributions from 6 Chin Bee Ave, VIT’s earnings is expected to continue to grow in the coming quarters,” says Goeyardi.
In addition, the analyst says VIT could potentially save up to $2 million in FY17 if the manager successfully attains the income tax-free status for a tax expense.
In a regulatory filing on Wednesday, VIT says it is awaiting the outcome of an advance tax ruling from the Inland Revenue Authority of Singapore (IRAS) on the tax transparency treatment for rental support received or receivable by the trust from Dec 29, 2016.
This comes after the Income Tax Act was amended in 1Q 2017 to allow tax transparency treatment to be accorded to rental income support payments, subject to certain conditions being met. As there is no assurance that VIT will receive a favourable tax ruling, the trust says it has continued to make provision for income tax expense.
According to Goeyardi, a favourable ruling could potentially translate to an additional of close to 2.8% to distribution.
Religare says its rating for VIT is currently under review. It previously had a “buy” call on VIT with a target price of 90 cents.
As at 12.03pm, units of Viva Industrial Trust are trading 1.5 cents higher at 93 cents.
