Brokers' take

ESR-Reit | Buy Target price: S$0.59 Sept 17 close: S$0.50 DBS Group Research, Sept 17

We maintain buy with lower target price of S$0.59. Post consolidation, ESR-Viva will emerge as the fourth largest industrial real estate investment trust (Reit) with around S$3 billion (+79.8 per cent) in assets. The implied acquisition yield of 5.8-5.9 per cent for Viva Industrial Trust's (VIT) portfolio is at the lower end of peers' range of 5.1-6.8 per cent, possibly reflecting the acquirer's optimism over longer term prospects and synergies.

While paying a 26.4 per cent premium to VIT's net asset value (NAV) appears high, we believe that benefits from the injection of VIT's higher-quality portfolio (including lower financing costs and trust-level saving) and merits of an enlarged vehicle should prevail.