Shares in oil refining and distribution group Viva Energy lost energy yesterday after the company - which only listed six months ago, downgraded full-year earnings - produced a surprise earnings downgrade.
Viva Energy REIT ((VVR)) is considered to be a low-risk, defensive stock which is trading on multiples that are in line with its long-leased A-REIT peers. The company has a property portfolio of service stations across metropolitan and regional Australia, valued at $2.2bn, which offer fixed income growth at low management costs.
Viva has successfully acquired two properties following due diligence and the other $45m of acquisitions announced back in June have now settled. It is Viva’s intention to grow through acquisition, the broker notes.
First half earnings were marginally better than Deutsche Bank’s estimates. The broker considers the stock attractive from a valuation perspective versus its peers, noting an FY18 yield of 6.4% versus peers of 5.3%.
The portfolio of 425 service station sites offers an attractive 2016 annualised distribution yield around 5.3%, Morgans observes. Potential catalysts include accretive acquisitions and inclusion in the index.