ARA Asset Management

Thanks. After some thoughts and reviewing the latest result probably i will just take up all the allocated rights. The result isn't as bad as it looks and current price is low to me. And i was given a discount.

Besides i think today there are announcements on the insider acquisition of the rights?

Lim How Teck 127,800
Lee Yock Suan 13,068
Lim Hwee Chiang 29,017,981

The more i understand the right issue the more i find my last disposal of Goodpack rights is kind of inappropriate. I was too lazy to find out more details and just take chance to pocket some money. Partly because i was always informed right issue is bad bad bad so i just don't want to get involved.

(26-11-2015, 08:19 PM)hongonn Wrote: Besides i think today there are announcements on the insider acquisition of the rights?

Lim How Teck 127,800
Lee Yock Suan 13,068
Lim Hwee Chiang 29,017,981

I think these announcements are in relation to these 3 shareholders receiving their rights from the rights issue, not as a result of open market purchases

(26-11-2015, 10:43 PM)EnSabahNur Wrote:

(26-11-2015, 08:19 PM)hongonn Wrote: Besides i think today there are announcements on the insider acquisition of the rights?

Lim How Teck 127,800
Lee Yock Suan 13,068
Lim Hwee Chiang 29,017,981

I think these announcements are in relation to these 3 shareholders receiving their rights from the rights issue, not as a result of open market purchases

Oops my mistake. I think the announcement form is quite misleading for stating something like this :p

"Circumstance giving rise to the interest or change in interest:
Acquisition of: 
Securities pursuant to rights issue"

At the current price of $1.20,
PE before right issue: 14.5x
PE after right issue: 17.1x

Hmm the right issue is pretty dilutive.

(27-11-2015, 11:43 AM)hongonn Wrote:

(26-11-2015, 10:43 PM)EnSabahNur Wrote:

(26-11-2015, 08:19 PM)hongonn Wrote: Besides i think today there are announcements on the insider acquisition of the rights?

Lim How Teck 127,800
Lee Yock Suan 13,068
Lim Hwee Chiang 29,017,981

I think these announcements are in relation to these 3 shareholders receiving their rights from the rights issue, not as a result of open market purchases

Oops my mistake. I think the announcement form is quite misleading for stating something like this :p

"Circumstance giving rise to the interest or change in interest:
Acquisition of: 
Securities pursuant to rights issue"

At the current price of $1.20,
PE before right issue: 14.5x
PE after right issue: 17.1x

Hmm the right issue is pretty dilutive.

I think the form is quite clear. If it was a market transaction it would have stated so.

Wonder why they did such expensive financing. Is it crucial for fund management company to have low gearing?

(27-11-2015, 12:49 PM)owq Wrote: I think the form is quite clear. If it was a market transaction it would have stated so.

Wonder why they did such expensive financing. Is it crucial for fund management company to have low gearing?

I think the question should be 'How can a fund Mgt company have high gearing'?

Fund Mgt companies have high ROEs, reflecting the asset/capital-light nature of their businesses. As such, there isn't too much collateral they can pledge to the bank to obtain loans.
You can imagine you are a banker and some guy who doesnt have hard assets like factory or land and wants to borrow $ from you, and it is not a bridging loan. You will think that guy is either mad or takes u for a patsy (or both).

Since their backers want them to get their feet wet as well, raising $ from shareholders is the most straightforward route.

(27-11-2015, 02:40 PM)weijian Wrote:

(27-11-2015, 12:49 PM)owq Wrote: I think the form is quite clear. If it was a market transaction it would have stated so.

Wonder why they did such expensive financing. Is it crucial for fund management company to have low gearing?

I think the question should be 'How can a fund Mgt company have high gearing'?

Fund Mgt companies have high ROEs, reflecting the asset/capital-light nature of their businesses. As such, there isn't too much collateral they can pledge to the bank to obtain loans.
You can imagine you are a banker and some guy who doesnt have hard assets like factory or land and wants to borrow $ from you, and it is not a bridging loan. You will think that guy is either mad or takes u for a patsy (or both).

Since their backers want them to get their feet wet as well, raising $ from shareholders is the most straightforward route.

Investors must note that this is traditionally not a capex-free business. The Fund Manager would have to seed a stake in the private funds or sponsor a strategic stake in a listed REIT. ARA managed to get around this problem in its early years with CK being the sponsor for Fortune REIT and the lack of activist investors with big stakes in independent-managed REITs. With the push towards developing its private fund business and the need to take up a strategic stake in Suntec REIT, do not assume that the business will continue to be a low capex business model. I do expect capex to be significant if they wish to grow their AUM. This isn't necessarily a bad thing - the 80 million raised could be used to seed a 800 million un-leveraged fund so there is a lot of room for fee expansion in the coming years if they manage to execute their growth strategy. Growth always have a price. The question a prospective investor must ask himself - is that a price he is willing to pay?

(Not Vested)

Fund Management is an asset light business. Need proof to see otherwise. A company in this industry and not asset light is likely to be a 2nd rated or trying to grow fast.

> Fund Management is an asset light business. Need proof to see otherwise.

This has changed. For private funds, the fund investors esp Sovereign Wealth Funds have raised the bar higher and higher.
They want fund management firms to inject seed capital... at X% of the fund. This is especially true for billion dollar asset purchases.

Straits Trading - John Lim vehicle was meant to provide seed capital to be a pioneer investor for any ARA new private fund. It still means that fund management firm ITSELF setting up private fund must put in capital. Eat own pudding is the name of the day.

So the bar gets higher higher, and some fund managements will drop out.

The fact that CALPERS pumped in extra capital and the recent a new SWF pumped in $ for ARA shows the strength of ARA in drawing SWFs. For a SWF to put capital, they do very thorough due diligence and can invite proposals from the world's top property fund managers.

ADF I was extended 2 years to allow more time to sell assets. While this decreases the IRR of the fund, John Lim has always put " (fund) investors interests first". So the integrity and putting the interest of ARA's fund investors is most crucial. This ensures repeat business and even higher fund allocation from fund investors.

I have laid out the 'capex' figures from ARA in recent years. Buddies can verify the numbers and descriptions.

FY 2009

Capex: $15.0 million
Description: Seed capital for ADF1 and participation in mezzanine loan in ARA Harmony Fund.
Net Gearing: Net Cash

FY 2010

Capex: $28.7 million
Description: Strategic stake in Cache REIT and investment in APN.
Net Gearing: Net Cash

FY 2011

Capex: 0
Description: Reduction in AmFirst REIT stake and repayment of mezzanine loan.
Net Gearing: Net Cash

FY 2012

Capex: $5.0 million
Description: Seed capital for ADF2
Net Gearing: Net Cash

FY 2013

Capex: $89.9 million
Description: Seed capital for ADF2 and CIP
Net Gearing: Net Cash

FY 2014

Capex: $37.9 million
Description: Seed capital for MIP and strategic investment in ARA-NPS
Net Gearing: Net Cash

9M 2015

Capex: $86.3 million
Description: Strategic stake in Suntec REIT, seed capital in Harmony III and ARA ShinYoung Residential Development Fund
Net Gearing: 0.29

Personally, I think ARA is a great company with excellent network of clients. The fee income model is superb but yet, the underlying REITs have performed fairly well. Perhaps I was too liberal with the term 'asset-heavy'. I'm merely pointing out that it is not a 'capex-light' business. Sure, it doesn't have to buy a factory but it needs to finance strategic stakes and seed capital. While these 'capex' isn't depreciable and can be easily rejuvenated if the Fund performs, it is still a tangible asset which needs to be paid upfront.

I will stress again. Having to seed private funds or purchase strategic stakes in REITs, doesn't imply its a poor business. What matters is how the underlying fund performs and the returns these investors obtain. If ARA executes that well, its own business should follow suit.

Please correct me if I am mistaken or my understanding is flawed.

(Not Vested)

On another note, boosted by its $100 million private placement in Nov, Cache REIT's buying spree of freehold Australian assets continues.

http://cache.listedcompany.com/newsroom/...elease.pdf

(Not Vested)