ARA Asset Management

Just compiled the sale of suntec reit units for management fee and acquisition fee.

It seems that ARA made loss regarding to its acquisition fee paid in units in 2011. acquisition fee units were issued @1.45, but the units were sold in early 2012 around 1.23.

It is so weird that ARA did not sell any units when Suntec Reit ran almost into $2. The sale of Suntec units has stopped since mid 2012 and Suntec Reit had a great run.

It only started to sell the units again recently around 1.5 - 1.6.

What was the management thinking of when Suntec Reit was around $2 early 2013?

It is not easy to time the market, so perhaps they had the impression that the stock would go higher than $2, then they will start selling

(16-09-2013, 10:09 AM)safetyfirst Wrote: It is not easy to time the market, so perhaps they had the impression that the stock would go higher than $2, then they will start selling

the units issued is for management fee. Should they be more concerned about getting the money back instead of getting more money from speculation of share price?

Now they are going to lose part of money because of this.

CEO John Lim bought 2 mil shares last week at average price of $1.599.

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CEO John Lim bought 2 mil shares last week at average price of $1.599.

(18-09-2013, 08:43 AM)gutman Wrote: CEO John Lim bought 2 mil shares last week at average price of $1.599.

I suppose it's reassuring to me as I'm at the level of losing sleep after buying and buying....

The FortuneREIT billion $ acquisition has also cleared EGM on 16-Sep

(18-09-2013, 08:43 AM)gutman Wrote: CEO John Lim bought 2 mil shares last week at average price of $1.599.

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CEO John Lim bought 2 mil shares last week at average price of $1.599.

Read the announcement yesterday and thought that was a cool $3.2 million of his own cash. Yes thought that was indeed reassuring (I recall he sold a large block of 31,360,000 shares at $1.42 last year).

I'm comforted by the fact that the recurring income is growing. However may i ask how does one ascertain the fair value of this business? PE, PB wise doesn't seem very appealing. By what metrics should one value this company?

(18-09-2013, 11:13 AM)valuehunter Wrote: However may i ask how does one ascertain the fair value of this business? PE, PB wise doesn't seem very appealing. By what metrics should one value this company?

Well according to John Lim in one of his presentations when asked this question he said it should be around 5% of AUM and he said this is what similar companies in US is also trading at. That being the case then fair value should be about 1.53 with latest AUM. So why is he buying at a premium to fair value. 2 scenarios:

1. to support his share price under attack
2. he thinks the aum is going up soon. given the latest fortune reit deal, aum will go up.

Everything considered, I think current share price is about right at fair value.

not vested....no discount to fair value.

(18-09-2013, 11:34 AM)Jacmar Wrote:

(18-09-2013, 11:13 AM)valuehunter Wrote: However may i ask how does one ascertain the fair value of this business? PE, PB wise doesn't seem very appealing. By what metrics should one value this company?

Well according to John Lim in one of his presentations when asked this question he said it should be around 5% of AUM and he said this is what similar companies in US is also trading at. That being the case then fair value should be about 1.53 with latest AUM. So why is he buying at a premium to fair value. 2 scenarios:

1. to support his share price under attack
2. he thinks the aum is going up soon. given the latest fortune reit deal, aum will go up.

Everything considered, I think current share price is about right at fair value.

not vested....no discount to fair value.

Thanks Jacmar!

ARA revenue and earnings consist of 2 parts - the recurring base management fees from its REITs and private funds + dividend income from its underlying investments and the lumpy performance / acquisition fees component which correlates to changes in AUM. Its earnings are also impacted by changes in fair value of its underlying investments.

In recent times, ARA has been kind to separate out the earnings from the 2 segments to ease investors understanding of the recurring aspect of the business. In 1H 2013, ARA reported recurring net profit of $27.0 million (vs net profit of $32.1 million). They defined recurring net profit as "Net Profit excluding acquisition, divestment and performance fees, finance income and finance costs, adjusted for the effects of tax". It must be noted that finance income do include dividend income so it isn't accounted for in this metric.

Annualizing the 1H 13 recurring EPS gives a figure of 6.40 SG cents. Assuming we value this recurring business at PER of 25, this translates to $1.60 (incidentally close to the price John Lim purchased last week). If we use a PER of 20, we get $1.28. The PER is a variable here - but note that this excludes contributions from acquisition fees and historically, ARA has generated substantial acquisition fees (including Fortune REIT recent M&A). Another issue, as pointed by Freedom, is that a portion of the fees are paid in REIT units which may be sold at lower price than its issued price.

(Odd Lots Vested)

(18-09-2013, 11:55 AM)Nick Wrote: Annualizing the 1H 13 recurring EPS gives a figure of 6.40 SG cents. Assuming we value this recurring business at PER of 25, this translates to $1.60 (incidentally close to the price John Lim purchased last week). If we use a PER of 20, we get $1.28.
(Odd Lots Vested)

May i ask why you would value the recurring business at 20-25x PE? Is this the norm in the industry? Eg. compared to similar listed co in US for example?