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Is the Viva Energy REIT share price a buy?

The VIVA Energy REIT Ltd (ASX: VVR) share price has climbed 2.02% higher to hit a 52-week high of $2.53 in Tuesday afternoon trade. The REIT has seen its share price grow by 26.5% over the last 12 months and 12.5% since the beginning of 2019. 

What is VIVA Energy REIT?

Viva Energy REIT is an Australian REIT group that owns a high-quality portfolio of service stations around Australia. The company has a market cap of around $1.92 billion. As a stapled entity, VIVA Energy REIT shares provide investors with one share in Viva Energy REIT Ltd and one unit in the Viva Energy REIT Trust.

Buying shares in a company like Viva Energy REIT provides investors with exposure to commercial property without the complications that come with direct property ownership.

With a portfolio of 437 Shell-branded service station properties around Australia, VIVA Energy REIT’s properties are typically operated by Coles Group Ltd (ASX: COL) as Coles Express service stations.

Based on the latest consensus data published on 20 March, Viva Energy REIT is classed as a strong buy with three analysts currently classifying the company as a buy, and one analyst classifying it as a hold.

How does VIVA Energy REIT compare to other Australian REITs?

VIVA Energy REIT’s performance is on par with other big Australian REITs including Scentre Group (ASX: SCG), Shopping Centres Australasia Property Group Re Ltd (ASX: SCP), Unibail-Rodamco-Westfield (ASX: URW), and Vicinity Centres Re Ltd (ASX: VCX).

The company’s current P/E ratio is 10.97 – compared to the market average P/E ratio of 14.80 and the sector’s average P/E ratio of 15.7.

VIVA Energy REIT’s P/E growth is 0.00 compared to 1.11 for the market and 1.45 for the sector. A P/E growth ratio of less than 1 generally means a stock is undervalued and it could be a good time to buy. This is good news for investors looking at VIVA Energy REIT as a buy opportunity.

So, is Viva Energy REIT a buy?

A look at VIVA Energy REIT’s majority shareholders demonstrates that the company is owned by some of the worlds largest financial institutions.

Viva Energy REIT’s five largest substantial shareholders include Viva Energy Australia Group (38.04%), HSBC Custody Nominees (Australia) Limited (15.38%), JP Morgan Nominees Australia Limited (13.09%), BNP Paribas Nominees Pty Ltd (4.41%), and Citicorp Nominees Pty Limited (4.37%).

In the company’s HY18 results released in August 2018, it was reported that Coles Express’ revenue has grown at a compound annual growth rate (CAGR) of 5% since Viva Energy REIT and Coles Express formed its alliance in 2003. This alliance will go until 2024 with the possibility of a 5-year extension.

The Petrol and Convenience industry is an $8.4 billion market in Australia, growing between 3.4% and 4.5% per annum for the 5 years to 2017.

On the back of Viva Energy REIT’s attractive P/E growth ratio, its alliance with Coles Express and the steady growth of the Petrol and Convenience industry in Australia now could be a great time to buy Viva Energy REIT shares.

No, this isn’t a tech unicorn stock that could soar by year-end, but it’s a great way to get exposure to commercial property in an industry that sells some of our household essentials.

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Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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