SINGAPORE (May 2): Maybank Kim Eng is maintaining its “buy” call on Viva Industrial Trust, despite lowering its FY18 estimates to factor in vacancy risks at its Jackson Square property, given the REIT’s 8% dividend yield support and potential share price upside.

Maybank continues to see Viva’s growth outlook positively skewed towards its two large business park assets, on the back of affirmative rental reversion and post-AEI (asset enhancement initiative) gains.

Viva received a liquidation notice from Jackson International (JIPL), the facilities manager of its Jackson Square property acquired in Nov 2014. JIPL had committed to providing rental support until Nov 2019 as part of the purchase agreement, which will now be ineffective.

“With Viva, however, entitled to a S$3.9 million bank guarantee support, we see limited impact on FY17 DPU estimates. Viva is seeking legal advice on its next course of action, and will share further updates when available,” says analyst Chua Su Tye in a Tuesday report.

But the analyst is revising his forecast to factor in higher vacancies at Jackson Square in FY18E.

“We believe our estimates are conservative because they assume a potential exit of the JPIL subsidiary tenants at 24% of the NLA (19% of gross rental income) following the liquidation process, even though they have not filed for liquidation nor defaulted on their rental payments,” says Chua.

Viva reported strong 1Q17 results with double-digit y-o-y increases in revenue, NPI and distributable income. DPU of 1.85 Singaporean cents met 28% of its full-year estimate. The performance was attributed to the acquisition of 6 Chin Bee Avenue (completed in Jan 2017), rental uplifts at 30 Pioneer Road, and ramping up of retail space at Viva Business Park.

Shares of Viva are trading at 82 Singaporean cents.